GIFT  OF 


THE  WAY  OUT 


ECONOMIC,  INDUSTRIAL,  FINANCIAL 


BY 

A.  F.  THOMAS 


J.  P.  BELL  COMPANY 

INCORPORATED 

LYNCHBURG,  VA. 

MCMXXII 


TT 


H  <    1 1 1 
•1 


COPYRIGHTED  BY 

A.  F.  THOMAS 

Lynchburg.  Va. 

1922 


CONTENTS. 

CHAP.  PAGE 

I.  TERMS  AND  PRINCIPLES 7 

II.  LAND   25 

III.  PRODUCTIVE  LABOR 45 

IV.  CAPITALISM  59 

V.    THE  DIVISION  OF  PRODUCTION  UNDER  CAP- 
ITALISM    86 

VI.    BUSINESS  CO-OPERATION 100 

VII.    LABOR  CO-OPERATION  113 

VIII.    THE  TREND  TOWARD  MONOPOLY 137 

IX.    THE  INDIVIDUAL  IN  CO-OPERATION 152 

X.    MONOPOLY 167 

XI.    CURRENCY  AND  BANK  CREDIT 199 

XII.  NEXT  STEPS  ..                                            ....241 


PREFACE. 

AN  APPEAL  AND  A  CHALLENGE. 

The  history  of  man  presents  a  succession  of  funda- 
mental social  changes  occurring  at  more  or  less  irregular 
intervals.  Each  epoch  is  governed  by  laws  applicable  to 
the  peculiar  conditions  and  circumstances  existing 
during  such  period.  It  is  no  more  possible  to  retain  in 
the  new  period  the  things  that  pertained  only  to  the  old 
than  it  is  for  the  man  of  to-day  to  transform  himself  into 
the  child  of  yesterday. 

There  are  many  indications  that  the  world  is  now  on 
the  eve  of  tremendous  social  change.  A  new  era  is  being 
born.  The  result  is  inevitable.  Men  have  the  alterna- 
tives of  adjusting  themselves  to  the  coming  order,  or  of 
resisting  it  to  their  detriment  and  perhaps  to  their  de- 
struction. The  nameless  graves  of  millions  bear  mute, 
but  convincing  testimony  to  the  truth  of  this  observation. 

The  hope  of  the  world  rests  upon  the  assumption  that 
men  will  become  wiser  and  better ;  that  they  will  develop 
enough  intelligence  and  character  to  adjust  themselves 
properly  to  the  environment  which  evolution  creates  for 
them. 

The  dominant  purpose  of  this  book  is  to  examine  ana- 
lytically the  fundamentals  of  the  social  order ;  to  discover 
and  make  plain  the  laws  of  social  evolution.  It  is  a 
search  for  truth  in  the  faith  that  we  shall  know  the  truth 
and  that  the  truth  shall  make  us  free. 

Since  mankind  moves  under  leadership,  it  is  my 
earnest  desire  to  focus  the  attention  of  the  leaders  among 
all  classes  upon  present  problems,  so  that  the  combined 
intellectual  and  moral  force  of  such  leaders  may  be  ap- 


532134 


plied  to  the  task  of  devising  proper  solutions.  If  the 
blind  lead  the  blind,  both  will  fall  into  the  proverbial 
ditch.  The  rignt  to  lead  rests  upon  the  possession  of 
superior  capacity  to  see  and  make  plain  the  better  way 
and  a  willingness  to  discharge  faithfully  the  duties  which 
this  better  endowment  imposes. 

This  work  is  intended  both  as  an  appeal  and  a  chal- 
lenge. An  appeal  to  forward  looking,  progressive  citi- 
zens to  reexamine  the  underlying  principles  of  social 
organization  and  to  exert  themselves  to  promote  a  better 
understanding  and  a  more  general  acceptance  of  such 
principles  as  their  judgments  may  approve.  A  challenge 
to  those  of  reactionary  and  conservative  tendencies  to 
expose  and  refute  the  fallacies  they  may  discover  and 
thus  prevent  the  acceptance  of  mistaken  conclusions  re- 
sulting from  them. 

In  the  treatment  of  the  different  subjects  I  have  pur- 
posely avoided  reference  to  any  authorities,  however 
eminent,  because  I  desired  to  present  the  case  solely  upon 
its  merits,  leaving  the  readers  to  reach  such  conclusions 
as  their  unbiased  judgments  may  approve. 

In  the  preparation  of  the  work  I  have  received  from 
many  generous  friends  valuable  suggestions  and  help, 
for  which  I  am  deeply  grateful.  With  this  general  ac- 
knowledgment goes  the  wish  that  opportunity  may  arise 
for  me  to  give  to  each  of  these  friends  more  specific  evi- 
dence of  my  appreciation  of  their  kindness. 

A.  F.  THOMAS. 
Lynchburg,  Va., 
May,  1922. 


6 


THE  WAY  OUT, 

ECONOMIC,  INDUSTRIAL,  FINANCIAL 
BY 

A.  F.  THOMAS. 
CHAPTER  I. 

TERMS  AND  PRINCIPLES. 

In  view  of  the  fact  that  such  terms  as  Cooperation, 
Collectivism,  Communism,  Capitalism,  Socialism,  Indi- 
vidualism and  the  like  have  acquired  meanings  which 
give  to  them  a  more  or  less  definitive  and  in  some  cases 
a  malevolent  significance  it  is  necessary  in  the  interest  of 
clarity  to  define  with  some  precision  the  sense  in  which 
they  are  to  be  used.  If  it  were  practicable  it  might  even 
be  desirable  to  coin  anew  the  terms  to  represent  the  ideas 
which  these  terms  are  intended  to  convey,  but  such  a 
course  seems  less  practicable  than  to  employ  the  present 
terms  even  at  the  risk  of  being  misunderstood  by  some 
and  misrepresented  by  others.  „  / 

Communism  The  term  Communism  and  its  derivatives 
defined.  wjjj  no^.  ^e  uge(j  jn  ^jg  discussion  to  rep- 

resent the  economic  theory  that  there  shall  be  State  own- 
ership of  all  property  and  that  the  State  shall  control  all 
means  of  production  and  distribution  of  the  products  of 
industry.  The  term  will  be  used  to  convey  only  the  idea 
of  the  common  ownership  of  the  particular  property  in- 
volved in  an  operation  for  the  common  benefit  in  which 
the  contribution  is  made  in  proportion  to  ability  and  the 
distribution  is  effected  according  to  need.  In  other 
words,  the  purpose  is  to  discuss  the  principle  of  contribu- 


8  THE  WAY  OUT 


tion  according  to  strength,  and  distribution  according  to 
need  as  exemplified  by  such  operations  as  may  employ 
this  principle  with  beneficial  effects. 

Socialism  The  term  Socialism  and  its  derivatives  are 

defined.  intended  to  convey  the  idea  of  collective  ac- 

tion, the  results  of  which  are  to  be  distributed  according 
to  contribution. 

individualism.  Individualism  will  be  used  in  a  sense  en- 
tirely negative  of  joint  action.  This  prin- 
ciple admits  of  no  organic  relation  between  individuals 
or  groups  and  hence  there  can  be  no  controlling  principle 
of  relativity  between  individuals  or  classes  of  society  in 
the  things  in  which  individualism  is  supreme. 

Cooperation  The  proposition  to  be  sustained  is  that  there 
inclusive.  }s  }n  every  social  organism  a  proper  sphere 
for  Communism,  Cooperation,  Socialism,  and  Individ- 
ualism, and  that  the  most  perfect  social  organism  is  that 
which  gives  each  of  them  its  proper  place  in  the  scheme 
of  general  cooperation. 

Growth  of  As  the  social  body  has  evolved  from  its 
Communism.  lowest  state,  Communism  has  developed  in 
consonance  with  it.  The  more  highly  developed  society 
becomes,  the  more  extensive  the  application  of  the  com- 
munistic principle.  It  may  be  shocking  to  many  to  learn 
that  all  people  are  communistic  and,  as  between  individ- 
uals, they  all  agree  in  principle,  differing  only  in  degree. 
Perhaps  the  earliest  communistic  organization  was  the 
family  in  which  the  stronger  members  combined  to  pro- 
duce, distributing  the  results  of  their  efforts  according 
to  the  needs  of  all.  It  is  according  to  this  natural  prin- 
ciple that  the  strong  labor  in  order  that  they  may  take 


TERMS  AND  PRINCIPLES 


care  of  the  weak.  It  is  a  provision  of  nature  to  insure 
the  welfare  of  the  genus.  As  social  growth  proceeds 

with  its  multiplication  of  individuals  and 
Organization,  increased  complexity  of  relation,  necessity, 

the  mother  of  invention,  compels  organiza- 
tion designed  to  promote  social  welfare.  Like  the  social 
body  it  naturally  becomes  increasingly  complex  and  its 
functions  embrace  an  ever  widening  sphere  of  activity. 

state  service  In  so  far  as  their  purposes  are  to  serve  the 
communistic.  State,  all  governmental  activities  are  neces- 
sarily communistic.  The  effort  to  preserve  the  peace  is 
but  another  expression  of  the  purpose  to  protect  the  weak 
against  the  imposition  of  the  strong.  The  establishment 
of  a  judicial  system  is  designed  to  furnish  means  by 
which  justice  and  protection  may  be  afforded  those  who 
cannot  protect  themselves. 

The  legislative  branch  of  government  is  charged  with 
the  duty  of  laying  down  the  rules  of  decorous  behavior 
and  the  executive  branch  of  government  has  the  duty  of 
administering  these  laws  and  may  call  into  play  the 
entire  force  of  society  to  compel  obedience  to  them.  The 
court  houses,  the  capitols  and  their  auxiliary  buildings 
are  constructed  and  maintained  at  the  public  expense. 
The  salaries  of  all  public  officers,  the  costs  of  armies  and 
navies  are  public  charges  collected  from  all  in  proportion 
to  the  individual  ability  to  pay  and  the  funds  so  derived, 
theoretically  at  least,  are  devoted  to  the  service  of  those 
who  stand  in  greatest  need.  The  public  free  school 
system,  open  as  it  is  to  all,  is  sustained  by  collections 
made  and  disbursed  in  the  same  way.  The 

Why  the  State  „.  .      , ,  .  .     ,,  J  . 

educates  controlling  reason  in  this  case  is  that  gen- 

eral education  is  necessary  to  the  normal 
development  of  the  social  body,  and  that  public  support 
and  operation  of  it  is  the  most  efficient  method  of  accom- 


10  THE  WAY  OUT 


plishing  the  desired  end.  Eleemosynary  institutions, 
care  of  the  deaf,  dumb,  and  blind,  provision  for  lunatics, 
penal  and  reformatory  institutions,  public  health  activ- 
ities, public  research  for  the  promotion  of  production  and 
many  other  activities  of  similar  character  form  the  ever 
increasing  list  of  subjects  that  rest  entirely  upon  the 
communistic  principle. 

Socialistic  Socialistic  action  is  confined  to  those  cooper- 
cooperation,  ative  operations  designed  to  produce  with 
highest  efficiency,  distributing  the  product  according  to 
the  demand  of  equity  based  upon  the  contribution  of  the 
individual.  In  other  words,  the  individual  under  this 
system  must  receive  the  equivalent  of  his  contribution. 
All  public  utilities  including  the  post  office,  private  bus- 
iness and  the  wage  system  function  on  the  socialistic 
principle.  Public  parks,  free  playgrounds,  sewers  or 
other  facilities  for  the  use  of  which  no  charge  is  made 
are  strictly  communistic,  while  water,  heat,  light  and 
other  service  for  which  the  individual  pays  in  proportion 
to  use  is  in  accordance  with  the  principles  of  socialism. 
Theoretically  all  socialistic  service  should  be  at  cost,  but 
business  and  the  wage  system,  under  private  initiative, 
cannot  fully  meet  this  requirement. 

Cooperative  It  will  be  observed  that  both  communistic 
production.  an(j  sociaiistic  operations  employ  coopera- 
tion in  production  whether  under  public  or  private  in- 
itiative, therefore,  on  the  productive  side,  there  is  no 
Distribution  difference  in  principle  between  them.  When 
the  distribution  of  benefits  begins,  commun- 
ism and  socialism  fall  under  diverse  principles,  the  first 
having  as  its  object  the  supplying  of  needs,  the  second 
devoted  to  equitable  division  between  individuals.  Com- 


TERMS  AND  PRINCIPLES 11 

love,  munistic  distribution  finds  its  raison  d'etre 

the  basis  of        jn  fae  emotional  nature  of  man  and  has  love 
as  its  basis.    On  the  other  hand,  socialistic 
action  is  founded  upon  reason.     Its  purpose  being  to 
Justice,  teach  a  standard  of  equal  justice  to  all,  it 

the  basis  of  demands  that  each  shall  receive  not  what  he 
socialistic  dis-  may  need  but  the  equivalent  of  that  which 
tribution.  he  contributed  to  the  production.  The  lan- 
guage of  the  first  is  that  the  injury  of  one  is  the  hurt  of 
all,  while  the  slogan  of  the  other  is  equal  and  exact  justice 
to  all  men.  Surprising  as  it  may  be,  the  fact  remains 
that  both  communistic  and  socialistic  principles  are  ex- 
tending their  spheres  of  action  in  all  cooperative  opera- 
tions whether  conducted  under  public  or  private  initia- 
tive. Especially  is  this  true  of  the  communistic  principle 
Growth  of  *n  so  called  private  business.  The  tremen- 
communism  dous  growth  of  welfare  work  and  the  in- 
in  private  creasing  assumption  of  risk  of  business 
business.  evidenced  by  provision  to  protect  the  indi- 

vidual workers  and  to  compensate  them  in  case  of  acci- 
dent furnish  indisputable  evidence  that  the  social  body 
is  functioning  at  an  ever  increasing  rate  in  accord  with 
this  principle. 

It  is  hardly  an  exaggeration  to  say  that  human  life 
completes  a  circle.  It  is  called  into  being  by  cooperation, 
is  welcomed  and  cared  for  by  communism,  the  strong 
taking  care  of  the  weak.  In  its  period  of  production  it 
conforms  to  cooperation  and  socialism,  and  its  declining 
years  lead  back  to  weakness  and  communism.  Com- 
munism, then,  may  be  said  to  welcome  life's  advent  with 
smiles  and  endearments  and  to  soothe  its  pains  of  parting 
with  loving  attention  and  tears. 

Individualism,  or  that  tendency  of  the  human  will  to 
think  and  do  that  which  the  intellect  determines  without 


12  THE  WAY  OUT 


regard  to  any  other  being,  has  necessarily  a  sphere  that 

is  constantly  circumscribed  and  narrowed  as  civilization 

advances.    It  is  the  right  of  private  judg- 

Individuahsm  ,,        .   ,  ,   ,       ,  , 

limited  ment,  the  right  to  choose  one  s  own  course, 

to  think  one's  own  thoughts  and  arrive  at 
one's  own  conclusions.  This  principle  in  its  simplest 
form  has  its  widest  application  in  the  case  of  the  lone 
savage  wandering  in  the  uninhabited  wilderness  where 
nothing  he  may  think  or  do  will  affect  others  of  his  kind. 
As  this  wanderer  emerges  from  his  wilderness  and  begins 
to  enter  into  contact  with  others  he  finds  his  opportunity 
for  applying  this  principle  growing  increasingly  less. 

individualism  It  is  not  intended  to  say  that  in  any  well 
valuable.  organized  society  this  principle  of  individ- 

ualism can  or  should  be  eliminated  since  it  is  the  basis 
upon  which  individual  initiative  rests,  a  valuable  help  in 
securing  the  highest  results  in  cooperative  effort.  It  is 
this  individual  faculty  that  makes  self  orientation  pos- 
sible, without  which  it  is  inconceivable  that  a  marked 
degree  of  human  progress  would  be  possible. 

It  will  be  seen,  then,  that  these  principles  of  socialism, 

communism  and  individualism  find  their  base  in  human 

nature  and  are  essential  parts  of  human 

Human  nature  .  _    J  _  .     . 

composite.  organization,  and  the  omission  of  any  of 
them  would  necessarily  impair  the  efficiency 
of  the  whole.  Manifestly,  then,  the  task  before  us  is  not 
to  abolish  them  but  to  promote  the  development  of  a 
higher  order  of  intelligence  that  will  lead  to  the  recogni- 
tion of  their  vital  importance,  and  to  apply  the  power  of 
Need  for  analysis  to  ascertain  correctly  the  proper 

greater  spheres  of  each  of  them  so  that  they  may 

intelligence.  function  normally  and  produce  a  harmon- 
ious result.  God  in  His  infinite  wisdom  has  not  created 
anything  without  beneficial  purpose.  Ignorance  with 


TERMS  AND  PRINCIPLES 13 

ignorance  its  resultin£  misapplication  and  abuse  is 
dangerous.  alone  responsible  for  the  ill  effects  that  in- 
cite abortive  attempts  to  destroy  that  which 
only  needs  enlightened  treatment  to  become  the  source  of 
public  well-being. 

Society  an  Man  is  a  gregarious  animal  forming  collec- 
organization.  tively  an  organism  called  society.  Ex- 
pressed mechanically,  this  social  body  functions  as  a 
machine.  Its  first  form  is  of  the  simplest  kind  with  its 
different  parts  loosely  jointed,  maladjustment  being  the 
rule  rather  than  the  exception.  A  low  order  of  efficiency 
which  such  an  imperfect  organization  insures  makes  the 

existence  of  cooperation  desirable  only  be- 
cooperation  cause  it  is  relatively  more  efficient  than  the 

still  more  wasteful  individual  action  which 
it  supersedes.  The  savage  hunter  sustaining  himself  by 
preying  upon  the  game  inhabiting  his  vicinage  finds  that 
some  brother  savage  divides  the  territory  with  him  and 
this  process  continues  until  the  tribe  is  evolved.  Then  it 
develops  that  under  the  form  of  cooperation  demanding 
division  of  labor  each  may  specialize  so  that  the  wants  of 
the  community  may  be  supplied  better  than  if  each  indi- 
vidual were  left  to  do  all  things  for  himself.  As  this 
community  enlarges  and  its  wants  multiply,  the  necessity 

for  closer  cooperation  and  more  efficient 
increased  methods  becomes  imperative.  As  the  minds 

of  the  people  develop,  the  first  evidence  of 
an  advancing  civilization,  their  wants  multiply  and  the 
social  relationships  become  increasingly  complex.  Re- 
verting to  the  mechanical  illustration,  one  may  say  that 
as  the  intensity  of  need  comes  apace  the  inventive  faculty 
under  this  stimulus  begins  to  devise  methods  by  which 
wants  may  be  more  easily  and  plentifully  supplied,  re- 
sulting in  a  better  readjustment  of  the  social  mechanism. 


14  THE  WAY  OUT 


The  extent  of  these  improvements  existing  in  the  body 
politic  at  any  particular  time  may  be  ae- 

Standard  of  *    *       .     ,          -    ,  „  . 

civilization  cepted  as  a  reliable  index  of  the  status  of  its 
civilization.  The  basic  reason  for  cooper- 
ation is  its  power  to  give  greater  efficiency.  If  the  indi- 
vidual could  do  by  himself  all  the  things  that  he  wanted 
done  as  well  and  with  the  same  expenditure  of  force  and 
energy  as  he  could  do  them  in  combination  with  others 
there  would  be  no  reason  for  cooperation  and  it  would 
cease  to  exist. 

Once  introduced  and  its  benefits  perceived,  cooperation 
can  never  be  abolished  so  long  as  man  retains  his  powers 
of  perception.    Resting  upon  the  unshakable  foundation 
of  necessity,  expanding  with  the  growth  of  human  need, 
it  becomes  more  and  more  an  indispensible  condition  to 
the  normal  life  and  growth  of  the  social  body.    It  then 
is  a  social  instrument,  and  like  all  other  in- 
struments may  be  employed  in  either  a 

Of  SOCial  .  „     ,  i  ,.     •     ••  mi          * 

instruments  harmful  or  a  beneficial  way.  The  fact  that 
it  may  be  abused  furnishes  no  reason  for  its 
destruction  or  the  limitation  of  its  use  for  right  purposes 
any  more  than  the  fact  that  the  necessity  for  the  execu- 
tion of  one  man  who  had  committed  a  heinous  crime 
would  make  desirable  the  destruction  of  the  entire  human 
race.  Manifestly  the  wise  and  prudent  thing  to  do  is  to 
facilitate  and  promote  in  every  permissible  way  the  ap- 
plication of  the  cooperative  principle  to  effect  such  pur- 
poses as  society  may  deem  to  be  desirable. 

Cooperation  begins  when  any  two  individuals  work 
together  to  effect  a  common  purpose  and  may  be  said  to 
be  both  intensive  and  extensive.    The  former  is  best  illus- 
trated by  the  combination  of  individuals  to  effect  definite 
purposes,  while  the  latter  is  recognized  in  the  effects  that 


TERMS  AND  PRINCIPLES 15 

the  sum  of  social  activities  have  on  the  body 
politic.    Cooperation  begins  with  the  small 
unit  and  in  the  first  stage  results  in  a  gen- 
eral multiplication  of  these  small  units  rather  than  in 
a  more  intensive  growth  of  any  particular  unit.    Hence, 
we  find  in  newly  settled  communities  that  business  is 
done  by  many  small  concerns  rather  than  by  a  less  num- 
ber of  larger  operations.    This  process  of  small  unit  de- 
velopment continues  until  the  field  is  crowded,  when  an 
economic  loss  results  because  the  community  is  compelled 
to  support  more  workers  in  a  given  service  than  are  nec- 
essary for  its  performance.     It  is  under 

Competition.  .    t7.  .... 

such  circumstances  that  competition  arises, 
since  it  is  only  after  the  service  required  is  less  than  that 
which  can  be  performed  by  the  agencies  provided  for  such 
service  that  it  can  possibly  arise.  In  such  cases  the  larger 
reason  for  permitting  competition  is  that  society  in  order 
to  prevent  overcharge  can  afford  the  economic  loss  result- 
ing from  devoting  more  labor  than  the  service  requires. 

If  protection  is  secured  to  the  individual  by  such 
method  it  nevertheless  leaves  society  to  pocket  the  eco- 
nomic loss,  since  there  is  never  any  compensation  for 
wasted  effort.  Again,  in  every  operation  there  is  a  max- 
imum of  possible  efficiency  and  any  unit  whose  volume  is 
less  than  that  required  to  produce  such  efficiency  can  be 
eliminated  by  some  larger  unit  possessing  a  higher  degree 
of  efficiency.  After  the  field  has  become 

Destructive  ....     ^  ..  M     j?  n 

competition  competitive,  there  necessarily  follows  in  an 
advancing  civilization  a  period  of  elimina- 
tion that  results  in  the  increase  in  the  size  of  the  units 
and  in  the  diminution  of  their  number.  There  are  two 
principal  methods  by  which  this  change  is  effected:  viz., 
the  collection  of  the  small  units  into  a  combination,  or  the 
enlargement  of  a  single  unit,  resulting  in  the  destruction 


16  THE  WAY  OUT 


of  the  small  ones.    Hence,  the  natural  ten- 

Tendency          dency  of  all  service  is  toward  monopoly. 

owar  ,pke  economic  limitation  of  the  size  of  the 

serving  unit  is  the  point  at  which  enlarge- 
ment and  coordination  cease  to  result  in  economic  saving. 
It  is  so  far  assumed  that  the  operation  will  take  place  in 
accordance  with  economic  law  and  that  the  substitution 
of  the  larger  unit  for  the  more  numerous  smaller  units 
has  been  entirely  on  account  of  its  higher  economic  effi- 
ciency. No  account  has  as  yet  been  taken  of  such  en- 
largement as  may  have  resulted  from  the  abuse  of  mo- 
nopolistic power,  which  subject  will  receive  subsequent 
notice. 

We  have  but  to  look  about  us  and  select  any  line  of 
service  in  manufacture  or  distribution  in  order  to  visu- 
alize correctly  the  process  we  have  been  attempting  to 
describe.  The  greatly  increased  economic  saving  made 
possible  by  the  invention  of  machinery  has  made  it  easy 
to  eliminate  the  smaller  units  of  production  and  has 
thereby  given  cooperation  a  tremendous  impetus.  As 
these  larger  operations  concentrate  in  productive  effort 
it  becomes  highly  essential  that  greater  specialization 
should  follow.  This  change  requires  that  the  workman 
rather  than  do  many  things  indifferently  shall  do  a  few 
things  and  do  them  well. 


of  Since  competition  is  an  essential  stimulus 

competition.  implanted  in  human  nature  for  the  purpose 
of  producing  excellence,  no  use  of  it  can  be  justified  that 
results  in  economic  loss.  Its  purpose  is  constructive,  and 
when  its  use  is  at  the  public  cost,  there  must  of  necessity 
be  a  misapplication  of  the  principle.  There  is  no  antag- 
onism between  cooperation  and  competition  when  they 
are  properly  coordinated.  The  latter  is  the  dynamic 


TERMS  AND  PRINCIPLES 17 

force  that  insures  a  high  order  of  efficiency  in  the  former. 
The  desire  to  excel  is  a  primal  instinct  carrying  with  it 
an  effort  to  surpass  the  accomplishments  of  others. 
Whether  it  is  in  a  game  of  marbles,  a  foot  race,  progress 
in  studies  or  the  effort  to  outdistance  others  in  manufac- 
turing, merchandising,  banking,  political  life,  or  any 
other  avenue  of  endeavor,  this  principle  asserts  itself. 
Man  loves  the  test  of  strength  or  skill  and  each  will  strive 
to  impress  his  prowess  upon  others.  The  higher  the  form 
of  cooperation  the  better  the  opportunity  for  the  exercise 
of  this  instinct.  The  general  with  his  army  of  millions 
has  greater  opportunity  to  exhibit  his  powers  of  leader- 
ship and  control  than  has  the  captain  with  his  hundreds 
or  the  sergeant  with  his  squad. 

Economics  of  The  advance  of  cooperation  is  effected  by  a 
cooperation.  course  of  progressive  elimination  of  the 
unnecessary.  The  formation  of  a  large  unit  to  take  the 
place  of  a  dozen  smaller  units  would  reduce  the  number 
of  necessary  heads  by  eleven.  This  process  continued 
throughout  the  organization  will  greatly  reduce  the  over- 
head cost.  The  larger  number  of  operatives  employed 
will  enable  the  directing  forces  by  specialization  to  utilize 
the  productive  power  of  the  combined  workers  more  effi- 
ciently, and  thereby  increase  the  sum  of  production  so 
that  each  participant  may  receive  a  larger  share.  If  the 
savings  were  divided  between  producers  and  consumers 
it  would  enable  the  large  unit  to  offer  its  wares  at  lower 
prices  than  the  smaller  units  could  afford,  Waiving  the 
question  of  the  large  unit's  advantage  on  account  of  the 
greater  volume  of  its  production,  it  may  well  afford  to 
rest  its  case  upon  the  possibility  of  selling  its  wares  at  a 
lower  margin  of  profit  and  reaping  its  reward  by  selling 
more  at  a  small  profit  rather  than  less  at  a  larger  profit. 


18  THE  WAY  OUT 


In  the  last  analysis  the  large  unit  can  out- 

The  ultimate         ,.   ,  .,  tl  -,  -,  ,, 

of  coo  eration     distance  its  smaller  rival  as  long  as  the 
larger  operation  can  effect  an  economic  sav- 
ing, but  when  the  point  beyond  which  this  is  possible  is 
reached,  nothing  save  arbitrary  power  can  preserve  it. 

Society  cannot  afford  for  any  reason  to  thwart  the 
effort  to  reach  the  acme  of  economic  and  industrial  evo- 
lution, neither  can  it  permit  abuse  of  power  to  maintain 
that  which  is  economically  inferior.     The  pathway  of 
cooperation,  in  common  with  all  other  avenues  of  human 
progress,  is  not  strewn  with  roses.    It  has  its  dangerous 
places,  its  pitfalls  and  snares  to  avoid.    The 
duty  to  tread  it,  however,  is  plain  and  re- 
fusal to  do  so  is  a  cowardly  admission  of 
social  incapacity.    It  should  not  be  presupposed  that  firm 
adherence  to  the  principle  of  cooperation  in  any  way  mil- 
itates against  a  full  recognition  and  a  thoroughly  healthy 
development  of  the  competitive  principle.     The  contest 
need  not  be  between  the  units  of  operation 
[onin    in  order  to  develop  the  full  expression  of 

cooperation.  .... 

competition,  as  it  can  do  so  more  completely 
by  bringing  its  forces  into  play  between  the  constituent 
elements  of  the  large  cooperative  unit.  To  suppose  that 
this  competitive  principle  should  be  mainly  used  to  pro- 
tect the  public  from  the  rapacity  of  competing  units  is 
greatly  to  misunderstand  and  to  underrate  its  true 
nature  as  a  stimulus  of  social  excellence.  In  the  not  very 
remote  past  the  public  mind  was  prepossessed  with  the 
idea  of  the  service  of  competition  as  a  police  agent.  The 
growing  spirit  of  cooperation  has  destroyed  its  power  for 
such  service  because  those  directing  the  activities  of  ser- 
vice have  become  sufficiently  enlightened  to  realize  that 
which  predatory  wolves  long  ago  discovered,  the  simple 
fact  that  it  is  productive  of  better  results  to  hunt  in  packs 
rather  than  alone. 


TERMS  AND  PRINCIPLES 19 

The  evolution  has  proceeded  to  a  point  where  inten- 
tionally destructive  competition  is  no  longer  possible,  for 
regardless  of  law  or  other  obstacles,  the  units  of  service 
thoroughly  know  that  their  best  interest  demands  that 
they  must  function  in  accord  with  the  coop- 
erative principle.    Man  will  act  as  his  own 
self-interest  dictates,  and  having  sufficient 
intelligence  to  understand  that  the  successful  conduct  of 
his  enterprise  depends  upon  cooperation  with  his  fellow 
servitors,  he  proceeds  to  do  it  in  the  way  presenting  least 
difficulty.    The  recognition  of  a  common  interest  between 
servitors,  thus  introducing  class  or  partial 

cooperation,  has  in  many  cases  had  the  vis- 
cooperation.  M  1  «•  ill-  "  J.  •  1 

ible  eiiect  01  checking  the  cooperative  evolu- 
tion. The  large  unit,  desiring  to  secure  a  higher  margin 
of  profit  than  its  services  are  worth,  based  upon  its  own 
cost,  refrains  from  passing  the  saving  on  to  the  public.  If 
the  cost  to  the  public  were  lowered  to  a  point  at  which  the 
smaller  units  could  not  survive,  the  larger  unit  would 
make  indisputable  its  monopolistic  character,  which 
would  most  likely  have  the  effect  of  strengthening  the  de- 
mand that  the  evolution  be  carried  to  its  logical  ultimate- 
public  monopoly.  For  these  two  reasons  the  large  unit 
cooperates  with  the  smaller.  The  latter  in  times  of  scar- 
city takes  advantage  of  the  public  needs,  puts  on  all  that 
the  business  will  bear  and  sells  at  a  higher  price  than  the 
large  unit,  but  when  the  public  need  abates  it  reduces  its 
prices  to  that  of  the  large  unit  or  ceases  operation  until 
times  become  more  auspicious. 

These  conditions  can  only  be  regarded  as  a  passing 
stage  of  cooperative  evolution.  The  many  abuses  that 
creep  into  the  movement  are  likewise  but  temporary  af- 
flictions that  society  will  eliminate  as  general  intelligence 
develops  and  experience  points  the  remedy.  The  pages 


20  THE  WAY  OUT 


of  history  are  replete  with  examples  of  evils  that  have 
affected  the  body  politic  but  it  also  furnishes  indisputable 
proof  that  many  forms  of  wrong  have  existed  from  age 
to  age  but  to  be  made  absolutely  impossible  in  succeeding 
times.     Evils  first  exist  in  grossest  forms 
and  become  gradually  refined  until  they  dis- 
appear.   We  can,  then,  adhere  with  hope  to  any  sound 
principle  with  the  assurance  that  the  good  within  it  will 
overcome  the  evil  that  may  attach  to  it. 

•  .     j  «/ 

Perhaps  the  greatest  danger  confronting 

development        ,.  ,  ,   .      f       .     ..  f3  , 

dangerous.  the  world  to-day  is  that  of  arrested  devel- 
opment. The  safety  and  even  the  existence 
of  the  present  civilization  depends  upon  going  forward. 
The  evolution  cannot  rest.  The  choice  left  us  is  to  pro- 
ceed, insuring  life  and  growth,  or  to  recede  again  to  the 
dismal  depths  from  which  man  after  ages  of  struggle 
is  only  now  emerging. 

Partial  The    thing    above    all    others    which    has 

cooperation  aroused  most  opposition  to  the  orderly  de- 
develops  velopment  of  cooperation  has  been  its  par- 
class  interests.  ,.11.,.  mi  •  i 

tial  application.    This  has  given  rise  to  class 

interests  which  operate  under  selfish  incentive  and  inflict 
injustices  upon  the  least  organized  elements  of  society. 
The  abuses  arising  from  this  cause  have  prejudiced  the 
public  mind  against  the  principle  of  cooperation  itself. 
This  antagonism  has  found  its  expression  in  the  enact- 
ments of  the  legislatures  and  the  congress  of  the  country. 
These  unwise  attempts  to  stay  the  rising  tide  of  combi- 
nation have  imposed  upon  the  judiciary  the 
task  of  making  law  by  strained  construction 

interference.  ,  J   , 

in  order  to  preserve  the  cooperative  prin- 
ciple, and  it  may  be  regretfully  said  that  in  doing  so  it 
does  not  always  eliminate  the  flagrant  abuses  that  were 
provocative  of  the  legislative  attack  on  the  principle. 


TERMS  AND  PRINCIPLES 21 

Capitalism  The  term  Capitalism  will  be  used  to  express 
defined.  y^  theory  that  capital  or  the  available 

supply  of  products  loaned  or  invested  is  entitled  to  a 
return  for  its  use,  and  the  term  Capitalist 
will  be  used  to  designate  the  owner  of  the 
capital,  who  in  the  capacity  of  capitalist  contributes  no 
labor  directly  or  otherwise  to  the  use  of  such  capital.  In 
other  words,  capitalist,  as  here  used,  is  synonomous  with 
investor.  If  the  capitalist,  in  addition  to  investing,  con- 
tributes to  the  operation  either  mental  or  physical  labor 
he  acts  in  a  dual  capacity  both  as  an  investor  and  as  a 
worker. 

Worker.  The  term  worker  will  be  used  to  describe 

one  who  contributes  his  effort  to  the  operation,  and  this 
effort  will  include  all  expenditure  of  energy  both  mental 
and  physical.  It  is  intended  that  both  labor  of  direction 
and  labor  of  execution  shall  be  classed  together. 

Land.  The  term  land  will  embrace  the  natural  cre- 

ation, including  all  spontaneous  growths.  It  excludes 
human  effort. 

labor.  Labor  will  be  used  to  express  the  application 

of  mental  and  physical  force  to  produce  a  result  and  the 
latter  will  be  designated  the  product. 

In  order  to  reach  reasonable  conclusions  regarding  the 

economic  status  an  understanding  of  the  laws  underlying 

it  is  indispensable.     Political  economy  is 

f con'°mIlcs         founded  upon  ethics.    Basic  right  principle 

founded  upon  _     ,.       \.       .,        mi  .  f  /?         j    ,• 

ethics  underlies  it  all.     This  moral  foundation 

gives  stability  to  it.  The  task  of  the  econ- 
omist is  to  analyze  the  complex  operations  of  society  and 
to  make  plain  the  divine,  immutable  law  that  governs 
them  and  to  point  out  the  effects  of  both  its  observation 


22  THE  WAY  OUT 


and  violation.    This  basic,  ethical  principle  is  absolute 
while  man's  relation  to  it  is  relative.    The  effects  of  con- 
formity to  this  law  we  call  good  and  the  effects  of  non- 
conformity we  call  evil.     Man  being  in  a 
state  of  imperfection  cannot  fully  comply 
with  the  requirements  of  the  infinite,  therefore  his  exist- 
ence and  acts  are  a  series  of  approximations. 

Natural  law.  Natural  law  is  perfect,  hence  has  the  in- 
herent power  of  enforcing  itself.  It  has  its  rewards  for 
those  who  observe  it  and  likewise  its  punishments  for 
those  who  infract  it.  It  is  in  this  school  with  its  rewards 
and  punishments  that  man  must  work  out  his  own  sal- 
vation and  learn  from  the  bitter  lessons  of  experience 
what  cannot  be  taught  him  in  any  other  way,  that  right 
living  is  fully  in  accord  with  that  principle  of  self  interest 
which  seeks  to  acquire  all  that  may  be  obtained  of  the 
things  that  contribute  to  one's  well  being. 

Compensation.     TT  ,      ,  .,  ,.         1M 

Here,  too,  he  learns  that  compensation,  like 
an  avenging  Nemesis,  is  ever  after  the  law-breaker,  in- 
flicting upon  him  punishment  in  proportion  to  his  viola- 
tions of  the  law. 

Evil  destroys  Happily,  the  beneficent  Creator  has  pro- 
ltself-  vided  that  evil,  or  the  effects  arising  from 

the  violation  of  law,  carries  within  itself  the  elements  of 
its  own  destruction.  Without  just  appreciation,  the  fact 
that  all  things  are  governed  by  law  and  that  compensa- 
tion compels  obedience,  administering  such  corrective 
punishment  for  violation  as  may  be  necessary,  there  is 

little  hope  of  arriving  at  correct  conclusions, 
effect.  Evil,  primarily,  is  not  a  cause  but  an  effect. 

Its  existence  indicates  to  the  eye  of  the  ex- 
perienced diagnostician  the  existence  of  maladjustment 
in  some  part  of  the  social  body  preventing  the  perform- 


TERMS  AND  PRINCIPLES 23 

ance  of  its  proper  functions  in  a  normal  way.  Many 
things  which  the  ignorant  believe  to  be  reprehensive  are 
entirely  praiseworthy  and  quite  essential  to  the  welfare 
of  society  when  their  place  is  understood  and  the  right 

application  is  made.  The  social  problem  is 
problem  ^°  ^race  ou^  human  instincts  and  tendencies 

and  to  bring  them  into  proper  relation  so 
that  society  will  function  in  a  natural  way,  thus  insuring 
beneficial  results. 

Cooperation,  communism,  socialism  and  individualism 
are  the  expressions  of  basic  human  tendencies,  all  of 
which  are  necessary  in  their  proper  spheres  to  produce 
harmonious  social  action.  Without  combination  and 
cooperation  the  highest  possible  efficiency  could  not  be 
obtained.  Without  communism  the  emotional  nature 
with  its  love  and  sympathy  would  become  atrophied. 
Without  socialism  the  struggle  for  justice  to  the  indi- 
vidual would  cease  and  without  individualism,  individual 
prowess  and  initiative  could  not  exist.  A 

The  task  and  duty  of  society  is  to  ascertain  the  respec- 
tive spheres  of  the  basic  human  promptings,  thus  making 
it  possible  to  enjoy  the  beneficial  results  of  their  proper 
uses.    Unwise  opposition  to  these  principles 
can  never  destroy  them  for  they  are  essen- 

destroy  human     ...  _   _    J 

tendencies.  ^ial  parts  of  human  nature  itself.  It  is 
toward  the  elimination  of  their  abuses  that 
man's  energy  should  be  directed.  There  is,  perhaps,  no 
field  that  would  be  productive  of  better  results  than  pa- 
tient and  honest  research  in  the  further  discovery  and 
classification  of  these  basis  principles.  If  this  construc- 
tive course  were  pursued  we  could  with  reason  hope  that 
society  would  make  great  strides  in  social  organization, 
after  which  our  social,  commercial,  industrial,  and  finan- 
cial life  could  proceed  uninterruptedly  in  human  service. 


24  THE  WAY  OUT 


The  abnormal  selfishness  of  the  intelligent 
selfishness  'ew  superinduces  a  biased  leadership  that 

misguides  the  ignorant  many,  making  the 
correction  of  abuses  an  excedingly  difficult  work.  This 
obstacle  to  progress  furnishes  the  explanation  of  the  un- 
fortunate fact  that  the  world  has  always  made  a  practice 
of  crucifying  its  saviors,  and  makes  eternally  true  the 
observation  that  without  the  shedding  of  blood  there  is 
Sacrificial  no  remission  of  sins.  Without  sacrificial 
effort  effort  there  can  be  no  salvation  in  this 

necessary.  world,  whatever  may  be  said  of  the  next. 

He  who  would  see  light  in  economic  and  social  matters 
must,  for  the  nonce  at  least,  cast  behind  him  his  interest, 
his  prejudices  and  his  regards  for  that  most  powerful 
yet  intangible  thing  called  public  opinion,  and  like  the 
true  scientist  proceed  with  unremitting  zeal  to  his  objec- 
tive— the  discovery  of  truth. 


CHAPTER  II. 

LAND. 

Land  is  the  basis  of  all  life,  vegetable  and  animal.    In 

an  economic  sense  it  may  be  said  to  embrace  the  natural 

creation  except  man.     The  latter's  power 

Power  over  .  /  .      ^_  •* 

land  over  it  consists  largely  in  the  ability  to 

change  the  form  and  place  of  matter.  He 
can  transform  it  from  unavailable  to  available  forms  but 
can  add  nothing  to  it  nor  take  anything  from  it. 

Man  being  a  social  creature,  land  is  his  common  heri- 
L  tage.  God  created  him  and  placed  him 

labor.  under  the  law  of  labor.    His  existence,  de- 

velopment and  happiness  depend  upon  his 
obedience  to  this  law.    Not  only  is  it  his  bounden  duty  to 
conform  to  it  but  it  is  his  inalienable  God-given  right  to 
do  so.    Production  being  the  effect  of  force  applied  to  land 
and  man's  life  being  dependent  upon  it,  the  right  to  land 
rests  upon  the  same  ground  as  the  right  to  live.    Man 
has  an  indefeasible  right  to  land  upon  which 
to  expend  his  force  in  order  that  he  may 

ownership  ,  .          .  •* 

of  land  carry  out  the  law  of  his  being  and  produce 

enough  to  sustain  life.  Air  and  water  are 
no  more  essential  to  his  existence  than  land.  None  will 
contend  that  man  has  a  right  to  sell  his  own  life  or  buy 
the  life  of  another,  yet,  when  a  system  of  vested  rights 
and  land  tenure  is  adopted,  all  except  land  owners  are  di- 
vested of  their  right  to  land  and  they  live  thereafter  by 
the  permission  of  land  owners. 

This  primal  right  to  land  is  not  exclusive  but  apper- 
tains to  every  human  being,  thereby  placing  society 
under  a  compelling  obligation  to  provide  proper  methods 
for  the  enjoyment  of  it  by  all  in  such  manner  as  will  not 
impinge  upon  the  rights  of  any. 

25 


26  THE  WAY  OUT 


Let  us  suppose  that  A  and  B  are  the  only  inhabitants 
of  the  earth.  They  own  it  in  common.  B  sells  his  un- 
divided one-half  interest  to  A  for  a  satisfactory  consid- 
eration. This  in  law  would  give  A  an  indisputable  title, 
making  him  the  sole  proprietor  of  the  earth.  B  could 
only  live  upon  it  by  and  with  the  consent  of  A.  He  could 
only  apply  his  force  to  land  in  such  manner  and  upon 
such  terms  as  might  be  prescribed  by  A.  Let  us  consider, 
too,  that  the  right  to  possess  carries  with  it  by  implica- 
tion the  right  to  dispossess.  If  A  thinks  proper  to  require 
B  to  vacate,  where  will  he  go?  Did  not  B,  when  he  sold 
his  interest  in  land,  barter  away  his  right  to  life  itself? 
When  man  sells  his  right  to  obey  the  law  of  his  being 
and  can  only  conform  to  it  by  permission  of  others  does 
he  not  violate  nature's  law  and  do  violence  to  the  man- 
dates of  his  Maker? 

Men  born  free     That  all  men  are  born  free  and  equal  is  now 

and  equal.  an(j  ]ias  always  been  true.      Not  that  any 

two  of  them  are  born  with  equal  capacity  or  talent,  but 
that  all  are  born  free  to  apply  the  mental  and  physical 
forces  with  which  God  has  endowed  them  to  carry  out  the 
law  of  being.  In  other  words,  they  are  equal  in  this,  that 
God  intended  that  they  should  have  equal  opportunities 
to  make  use  of  their  powers  to  work  out  their  own  des- 
tinies. 

The  right  to  live,  move,  and  have  our  being,  to  apply 
our  force  to  land  in  order  to  produce  is  deeply  funda- 
Th  *  ht  mental.  We  have  no  more  right  to  sell  it 
to  life.  ^an  we  have  to  forfeit  our  lives  for  a  con- 

sideration. No  court  would  enforce  a  con- 
tract involving  the  direct  sale  of  human  life.  It  would 
declare  such  a  contract  void  as  being  against  public 
policy. 


LAND 27 

Land,  being  a  common  heritage  cannot  be  regarded 
as  property  haying  an  exchange  value.  It  may  be  ob- 
served, however,  that  labor  belongs  to  the  laborers  and 
that  force  expended  on  land  gives  results.  These  results 

are  the  property  of  him  who  did  the  work, 
onabo'r US  Therefore,  it  is  only  the  land  itself  that  has 
property  no  va^ue  as  property,  but  the  improvements 

resulting  from  human  labor  are  clearly 
property  and  are  therefore  legitimate  subjects  of  ex- 
change. 

If  A  resides  upon  a  tract  of  land,  fences  and  ditches 
it,  enriches  it,  plants  trees  and  builds  houses  upon  it,  not 
only  would  it  be  an  injustice  to  allow  B  to  possess  and 
enjoy  without  compensation  the  benefits  arising  from 
A's  labor  and  forethought,  but  it  would  also  be  a  flagrant 
violation  of  the  ethical  principle  that  demands  that  each 
worker  shall  have  the  result  of  his  labor. 

No  conflict  The  reconciliation  of  the  apparently  con- 
of  rights.  flicting  rights  involved  in  the  common  own- 

ership of  land  and  the  individual  ownership  of  improve- 
ments presents  to  many  minds  a  most  serious  difficulty. 
The  conflict  is  more  apparent  than  real.  When  the  prin- 
ciples are  thoroughly  understood  it  will  be  found  that 
there  is  no  conflict  between  them  but  that  both  are  sound 
and  practicable.  The  important  points  are  that  the  in- 
dividual's right  to  that  which  he  produces  shall  be  amply 
protected,  that  none  shall  enjoy  the  fruits  of  his  labor 
without  making  due  compensation,  and  that  none  shall 
possess  vested  rights  in  that  which  is  the  common  heri- 
tage. The  right  of  the  workman  to  all  the  products  of  his 
labor  is  clear,  and  the  right  of  all  to  a  just  participation 
in  that  which  by  natural  law  is  common  property  is 
equally  obvious. 


28  THE  WAY  OUT 


Democracy  From  this  doctrine  of  common  rights  we  de- 
rests  upon  duce  y^  underlying  principles  of  demo- 
common  rights.  cra^jc  government,  which  necessarily  pre- 
supposes the  existence  of  a  social  unit.  Such  a  form  of 
government  cannot  exist  except  in  so  far  as  a  common 
interest  runs  through  its  institutions,  and  it  is  only  under 
such  conditions  that  the  individual  can  hope  to  come  into 
full  possession  of  his  right  to  live,  move,  and  apply  his 
powers  in  accomplishing  the  purposes  for  which  an  om- 
niscient God  called  him  into  being. 

Opposing  In  this  connection  there  exist  two  theories. 
theories  of  rpjte  one,  that  man  is  a  homogeneous  cre- 


the  creation       ^^  and  that  ethnologically  there  exists  no 

of  man.  ,  ,.     .     ,,  ,•      *•  /• 

natural  reason  to  limit  the  application  of 
the  democratic  principle.  The  other  rests  upon  the  as- 
sumption that  there  were  separate  creations  of  man,  ne- 
cessitating the  restriction  of  the  application  of  the  demo- 
cratic principle  to  each  race  in  its  own  jurisdiction. 
Under  this  theory  the  principles  of  democracy  cannot  be 
applied  to  a  mixed  society  but  are  practicable  only  in  ter- 
ritories in  which  racial  homogeneity  exists.  Where  dif- 
ferent races  inhabit  the  same  territory  uniform  prin- 
ciples will  only  apply  to  the  stronger  race,  forming  a  dem- 
ocratic oligarchy.  If  this  theory  is  correct  and  demo- 
cratic government  is  to  obtain,  it  clearly  makes  necessary 
the  segregation  of  races,  assigning  each  to  its  part  of  the 
earth's  surface  where  it  may  develop  its  own  civilization 
untrammeled  by  racial  antagonism.  The  purpose  of  re- 
ferring to  these  different  theories  at  this  point  is  not  to 
discuss  their  merits,  but  simply  to  point  out  that  the  ac- 
ceptance of  the  theory  of  separate  creation,  while  it  may 
•p.  •  .  f  make  necessary  the  acceptance  of  the  prin- 
the  land.  c^e  °'  division  of  the  earth,  does  not  in  any 

way  militate  against  the  contention  that 
land  is  common  property. 


LAND 29 

Vested  rights      Once  granted  that  vested  rights  in  land  are 
in  land  de-         vaiid>  it  must  be  a(jmitted  that  men  are 

11' lity  neither  born  e(iual  nor  f ree>  but  that  they 

must  live  and  share  in  the  benefits  of  nat- 
ural wealth  by  permission  rather  than  by  right.  Such  an 
assumption  would  give  the  proprietor  having  a  natural 
monopoly  the  right  and  power  to  compel  his  fellow  men 
to  labor  and  accept  in  return  only  such  part  of  the  result 
of  their  labors  as  the  owner  might  prescribe.  Such  an 
arrangement  penalizes  the  worker  for  carrying  out  the 
mandates  of  the  natural  law  under  which  he  has  his 
being.  Under  no  circumstances  can  it  be  admitted  that 
one  individual  should  have  the  right  to  take  without  com- 
pensation and  without  consent  the  products  resulting 
from  the  labor  of  another.  Neither  can  it  be  admitted 
that  society,  acting  through  its  agency,  the 
government,  has  the  right  to  take  the  pro- 

tne  individual     °  7.          .          °  * 

in  property.  ducts  of  the  individual,  except  so  much  as 
under  equal  and  uniform  laws  may  be  nec- 
essary to  discharge  a  common  duty  or  provide  for  a  gen- 
eral service.  When,  therefore,  individuals  acting  singly 
or  jointly  seize  upon  the  treasures  that  the  Creator  has 
stored  in  the  bowels  of  the  earth  for  the  common  use  of 
its  inhabitants  and  proceed  to  demand  that  mankind  shall 
pay  tribute  for  the  privilege  of  using  this  wealth  created 
for  all,  they,  by  force  of  mistaken  theory  supported  by 
human  law,  wrest  from  the  dispossessed  part  of  mankind 
a  part  of  their  products  without  giving  anything  in  re- 
turn. It  is  of  course  understood  that  this  exaction  is  con- 
fined to  the  part  received  for  the  ownership  of  the  mines 
exclusive  of  the  cost  of  mining  and  preparing  the  product 
for  market. 


30  THE  WAY  OUT 


Abuse  of  the  Think  of  the  immense  power  that  the  pri- 
common  right.  va^e  ownership  of  natural  wealth  vests  in 
the  few  and  of  the  untold  deprivations  and  misery  that 
the  abuse  of  this  power  occasions !  Can  one  conceive  that 
an  omniscient  Creator  decreed  that  these  things  should 
be  owned  by  a  small  number  of  the  inhabitants  of  the 
earth  and  that  the  greater  part  of  mankind  should  enjoy 
them,  if  at  all,  by  sufferance?  Even  in  this  enlightened 
age  there  are  some  of  the  possessors  of  natural  wealth  ab- 
solutely essential  to  life  and  happiness  who  have  brazenly 
proclaimed  that  divine  providence  has  bestowed  this 
wealth  upon  the  select  few,  which  by  implication  declares 
that  if  providence  and  its  vice-gerents  should  so  ordain 
the  people  must  tamely  acquiesce. 

If  A  owns  the  vested  right  in  the  coal  lands  and  B  owns 
the  iron  lands,  can  they  not  refuse  to  exchange  products 
and  deny  the  rest  of  the  world  access  to  them?  In  such 
cases  have  they  not  the  right  to  place  their  own  estimate 
of  value  upon  these  things  and  compel  mankind  to  meet 
their  exorbitant  views  or,  failing,  do  without  them?  But 
what  are  the  rights  of  the  people,  the  hopes  of  a  progres- 
sive civilization,  yea,  the  lives  of  millions,  compared  to 
the  sacred  white  elephant  of  vested  rights  in  real  estate? 

Land  existed  before  human  law  came  into  vogue. 
Man's  law  is  simply  the  embodiment  of  his  conception  of 
the  rights  that  should  obtain  in  the  existing  state  of  civ- 
ilization. The  institution  of  vested  rights  in  real  estate 
was  peculiarly  conventional.  There  was  nothing  partic- 
ularly sacred  about  it,  and  like  other  man-made  laws  it 
should  be  continued  only  as  long  as  in  the  judgment  of 
the  people  it  represents  the  most  practicable  approxima- 
tion to  the  natural  law  governing  the  case.  It  has  behind 
it  the  power  of  precedent  and  long  existence.  But  so  had 
human  slavery. 


LAND 31 

The  wisdom  of  moving  carefully  in  the  matter  of 
changing  old  and  well  established  systems  is  fully  recog- 
nized, but  this  laudable  conservatism  should  not  be  al- 
lowed to  degenerate  into  indiscriminate  acceptance  of 
hoary  wrong. 

The  contention  here  is  not  that  existing  customs  should 
be  abolished  in  toto  and  an  entirely  different  system  in- 
troduced, but  the  purpose  is  to  urge  the  acceptance  of 
the  correct  premise  and  to  insist  upon  the  right  to  make 
application  of  the  correct  doctrine  whenever  public 
exigency  may  make  it  desirable.  The  establishment  of 
the  soundness  of  the  principle  is  the  important  point. 
The  acceptance  of  this  premise  by  no  means  commits 
society  to  any  particular  degree  of  application  of  it  any 
more  than  the  acceptance  of  the  right  of  the  public  to  in- 
troduce a  system  of  police  supervision  commits  it  to  the 
policy  of  having  all  human  activities  supervised.  In 
thickly  settled  communities  the  police  force  becomes 
highly  necessary,  while  in  the  more  sparsely  settled  dis- 
tricts their  services  would  be  useless.  Just  so  in  the  ap- 
plication of  the  doctrine  of  the  common  ownership  of 
land,  it  would  stand  society  in  good  stead  in  exceptional 
cases  while  it  would  not  be  of  practical  importance  in 
many  others. 

Conservative  Once  the  true  principle  is  accepted,  there 
change  of  appears  to  be  no  valid  reason  why  the 
change  of  system  should  not  come  about  in 
a  conservative  way  without  harm  to  any  except  the  im- 
mediate beneficiaries  of  public  wrongs.  The  application 
of  the  new  principle  should  be  confined  to  those  cases  in 
which  the  public  exigency  requires  it.  When  individ- 
uals or  combinations  of  them  seize  upon  natural  riches 
and  proceed  to  impose  exactions  upon  mankind,  the  as- 
sertion of  the  true  principle  will  stand  the  people  in  good 
stead. 


32  THE  WAY  OUT 


From  the  premise  that  land,  with  all  that  is  stored  in 
it  and  all  that  it  produces  spontaneously,  is  a  common 
heritage  made  by  the  Creator  for  the  common  benefit, 
more  enlightened  and  equitable  deductions  can  be  drawn, 
viz.,  that  the  minerals,  ores,  and  timber  are  common 
property,  and  that  he  who  applies  his  force  to  their  appro- 
priation owes  compensation  only  to  the  State  as  the  repre- 
sentative of  society,  and  that  he  has  no  ethical  right  to 
add  to  the  labor  cost  of  his  products  anything  except  so 
much  as  may  be  necessary  to  cover  the  amount  paid  so- 
ciety for  them.  This  public  charge  for  material  and  a 
proper  wage  for  his  labor  are  all  that  should  be  added  to 
the  product.  It  is,  of  course,  admitted  that  in  the  compu- 
tation of  the  wage  due  weight  should  be  given  the  risk 
involved  and  a  proper  insurance  charge  added,  which,  if 
correctly  done,  will  only  serve  to  cover  actual  losses.  The 
payment  to  society  for  the  material,  the  amount  of  a  fair 
wage  and  the  correct  insurance  charge  compose  the  cor- 
rect price  of  the  finished  product.  If  more  than  this  is 
added  it  cannot  be  justified  upon  ethical  grounds,  and 
such  excess  becomes  an  exaction  which  society  must  bear 
on  account  of  the  social  maladjustment  that  makes  it 
necessary  or  possible. 

The  desire  of  the  individual  to  swell  his  income  by  the 
increase  of  this  inethical  charge,  with  mere  possession  as 
the  motive,  can  only  be  regarded  as  a  moral  delinquency, 
that  is  to  say,  a  wish  to  possess  that  which  belongs  to 
another  and  a  willingness  to  acquire  it  without  giving 
adequate  compensation  in  return.  When  this  attitude  of 
mind  is  thoroughly  analyzed,  it  will  be  found  to  rest  upon 

v  the  same  basis  as  robbery.    Any  economic 

Spoliation  of  J  f     •  i         -n 

the  weak.          system  that  functions  on  this  principle  will 
necessarily  give  rise  to  the  spoliation  of  the 
weak  for  the  benefit  of  the  strong. 


LAND 33 

The  common  right  in  land,  inalienable  in  its  nature, 

rises  paramount  to  the  title  that  any  Esau  can  possibly 

make.     This  doctrine  of  common  ownership  of  land  is 

not  new  and  is  still  recognized  to  a  limited  extent  in  the 

law  of  eminent  domain.    As  the  public  good 

Eminent  ..  111,11  •  •. 

domain  demands  land,  the  law  provides  under  cer- 

tain conditions  for  its  condemnation.  It  is 
true  that  the  application  of  this  principle  has  been  more 
or  less  restricted,  the  reason  for  which  may  be  found  in  a 
lack  of  the  recognition  of  the  necessity  for  it.  That  all 
the  relations  of  land,  labor,  and  the  rights 
bylaw  °^  individuals  should  be  regulated  by  law, 

whenever  recognized  as  socially  necessary, 
is  readily  admitted.  That  the  law  should  provide  safe- 
guards to  protect  the  industrious  toiler  against  the  cu- 
pidity of  predatory  neighbors  and  insure  him  the  safe 
enjoyment  of  the  fruits  of  his  labors  is  patent  to  all  fair 
minds ;  but  it  is  equally  plain  that  safeguards  should  like- 
wise be  provided  against  the  injustice  that  results  from 
a  seizure  by  a  part  of  the  people  of  that  which  belongs 
to  all  the  people. 

That  anyone  should  have  the  power  to  hold  unimproved 
and  uncultivated  land  while  homeless  thousands  stand 
ready  to  occupy  and  employ  their  productive  force  upon 
it  is  so  palpably  wrong  that  no  argument  should  be  neces- 
sary to  prove  it.  One  of  the  most  indefensible  practices 
c  resulting  from  the  doctrine  of  vested  rights 

Speculation          .  .  „ 

in  land  1S  speculation  in  land.    From  the  small  lot 

to  the  vast  forests,  it  is  a  common  practice 
for  the  speculators  to  withhold  this  land  from  use.  Like 
the  proverbial  dog  in  the  manger,  they  will  not  use  it 
themselves  nor  permit  others  to  do  so  except  upon  terms 
highly  favorable  to  themselves  and  exceedingly  unjust  to 
those  who  of  necessity  must  submit  to  the  imposition. 


34  THE  WAY  OUT 


Such  an  act  is  an  unrighteous  seizure  of  the  common  pos- 
session and  is  for  the  purpose  of  holding  land  out  of  use 
until  the  labors  of  others  have  developed  the  adjacent  ter- 
ritory, or  until  the  public  need  for  its  use  has  become 
sufficiently  pressing  to  enable  the  holder  to  levy  tribute  in 
the  way  of  profit  on  land.  This  practice  alone  should  be 
sufficient  to  convince  unprejudiced  minds  of  both  the  in- 
justice and  the  unwisdom  of  the  doctrine  of  vested  rights. 
The  possession  of  a  piece  of  land  around  which  a  million 
people  are  gathered  brings  to  the  owner  untold  wealth 
in  the  exchange  value  of  land  for  which  he  has  not  so 
much  as  lifted  his  finger.  We  know  that  there  is  no 
legitimate  way  that  wealth  can  be  acquired  except  by 
labor  or  gift.  Hence,  as  the  owner  of  land  reaps  a  rich 
harvest  where  he  has  not  sown  anything,  it  is  fair  to 
assume  that  there  is  something  radically  wrong  in  the 
proposition. 

Retards  devel-  Not  only  does  this  doctrine  permit  the  few 
opment.  £0  appropriate  the  value  created  by  the 

many  but  it  permits  the  landowner  to  retard  the  progress 
of  desirable  aggregation  that  would  otherwise  be  pos- 
sible. It  is  often  the  case  that  useful  ground  is  kept  out 
of  use  for  years  until  some  fortunate  death  removes  a 
social  incubus  and  makes  possible  improvements  that 
would  have  been  made  years  before  had  the  land  been 
free.  The  proposition  that  all  men  should  have  access  to 
land  for  the  purpose  of  labor  and  use  is  well  founded,  but 
it  is  plainly  in  derogation  of  the  common  right  to  permit 
anyone  to  hold  land  out  of  use. 

Another  important  deduction  from  the  premise  that 
land  is  a  common  heritage  is,  that  whenever 
^e  right  of  eminent  domain  is  to  be  exer- 
domain'  cised,  the  measure  of  the  damages  to  the  pri- 

vate holder  should  be  a  fair  compensation 
for  the  improvements  on  the  land.     That  is  to  say,  the 


LAND 35 

holder  should  receive  full  compensation  for  everything 
on  the  land  that  has  resulted  from  labor,  but  the  land 
itself  should  be  considered  without  exchange  value  be- 
cause the  fee  resides  in  the  whole  people  and  such  title 
cannot  be  rightfully  sold.  When  society  needs  land  for 
a  public  purpose,  in  justice  it  should  be  permitted  to  take 
back  its  own  without  cost  save  just  compensation  for  ex- 
isting improvements. 

The  question  naturally  arises  as  to  the  justice  of  taking 
for  nothing  that  which  has  been  bought  and  sold  for  gen- 
erations. Have  not  these  sellers  and  purchasers,  acting 
in  good  faith,  conformed  to  the  law  and  custom  of  the 
land,  and  thereby  cured  whatever  defect  may  have  ex- 
isted on  account  of  the  original  common  interest?  The 

common  right  is  inalienable,  hence  could 
inalienable  never  rightfully  be  sold.  Such  transfers  of 

title  were  and  still  are  against  the  natural 
law  that  has  always  existed.  When  the  king  or  sovereign 
held  the  title,  he  did  so  not  in  fee  but  in  perpetual  trust 

for  the  benefit  of  that  immortal  ward  called 

Society  .  ,  ,  ,  .  .,  ,, 

immortal  society,  and  his  power  over  it  mostly  con- 

sisted in  the  right  to  subject  the  holding  to 
beneficial  use.  Any  attempt,  therefore,  to  alienate  title 
by  vesting  it  in  any  part  of  society  to  the  exclusion  of  the 
rest  was  an  abuse  and  a  betrayal  of  a  perpetual  trust 
which  no  human  law  could  make  valid  even  if  it  were 
sanctioned  by  the  unanimous  consent  of  the  living  mem- 
bers of  society,  for  the  very  simple  reason  that,  while  they 
themselves  might  be  willing  to  such  a  transfer  of  title, 
they  would  have  no  right  to  impose  their  will  and  judg- 
ment upon  succeeding  generations.  The  latter  would 
still  have  the  right  to  claim  title  under  natural  law. 

Under  human  law  slavery  existed.  Men  and  women 
were  seized  and  sold  as  commodities  in  the  market.  They 
were  property,  yet  when  the  public  conscience  and  intel- 


36  THE  WAY  OUT 


ligence  were  sufficiently  developed  to  recognize  that  the 
institution  was  in  violation  of  the  natural  right,  it  was 
fully  wiped  out  of  existence  and  the  holders  got  nothing. 
Even  now  if  land  is  sold  and  bought  in  perfect  good  faith 
and  the  third  party  comes  along  proving  a  prior  right,  the 
law  gives  him  the  property  and  offers  no  redress  to  those 
holding  the  land  except  recourse  upon  the  parties  from 
whom  it  was  purchased.  In  the  case  of  land,  this  re- 
course would  likely  lead  back  through  a  long  line  of  in- 
dividuals, finally  resting  with  the  State  which  had 
granted  away  the  people's  heritage  for  a  paltry  consid- 
eration. 

If,  then,  the  statute  law  does  not  protect  the  buyer 
against  claimants  proving  priority  of  title,  by  parity  of 
reasoning,  the  people,  when  they  can  demonstrate  that 
their  title  as  common  owners  is  better  than  that  of  the 
private  holders,  should  receive  their  own  again  without 
cost  other  than  the  amount  the  State  originally  received 
for  it.  While  it  is  true  that  the  individuals  now  owning 
the  land  may  not  be  responsible  for  the  inauguration  of 
the  system,  it  is  equally  true  that  the  people  at  large  who 
are  injured  are  no  more  responsible.  Since  the  private 
holders  have  reaped  the  advantage  accruing  from  this 
violation,  and  the  people  have  suffered  all  the  loss  oc- 
casioned by  it,  there  is,  in  spite  of  a  degree  of  injustice  in 
special  instances,  as  is  usual  in  a  process  of  readjustment 
in  a  general  way  a  more  or  less  accurate  division  of 
profits  and  losses.  This  objection,  then,  does  not  furnish 
a  valid  reason  against  the  reestablishment  of  the  correct 
doctrine. 

Repossessing      Should  it  ever  become  necessary  for  the  gen- 

mmes,  wells,      eraj  government  to  take  over  the  mines  and 

wells  of  the  country,  it  would  owe  to  the 

present  owners  the  full  cost  of  all  existing  improvements, 


LAND 37 

but  for  the  ore  beds  and  oil  sands  nothing  as  a  matter  of 
justice  should  be  paid.  It  is  quite  conceivable,  however, 
that  it  might  be  good  policy  to  compensate  owners  for  the 
land  in  a  reasonable  way,  not  as  a  matter  of  right,  but  as 
one  of  expediency. 

Our  constitution  provides  that  private  property  shall 
not  be  taken  for  public  use  without  just  compensation. 
The  Congress  has  the  power  to  prescribe  the  method  of 
ascertaining  such  compensation.  Any  change  of  prin- 
ciple in  this  regard  must  necessarily  be  accomplished  by 
constitutional  amendment.  If  such  change  were  effected, 
restoring  the  fee  to  the  public,  making  its  ownership  of 
natural  wealth  clear,  it  would  still,  perhaps,  be  expedient 
to  provide  by  statute  for  taking  over  land  already  held 
by  private  parties,  and  for  paying  the  holders  the  value 
of  improvements  based  on  cost,  or  cost  of  replacement, 
whichever  was  the  lower,  and  a  fair  price  for  the  land  not 
in  excess  of  actual  cost  to  the  holder.  Due  deductions, 
however,  should  be  made  for  whatever  depletion  may 
have  occurred  in  the  natural  resources  since  the  date  of 
the  holder's  purchase.  Such  payment  for  the  land  itself 
should  be  regarded  as  a  largess  to  soften  the  rigors  that 
would  necessarily  follow  the  too  strict  enforcement  of  the 
correct  principle.  In  ascertaining  the  amount  of  such 
largess  no  element  of  profit  or  increased  value  based  upon 
prospective  gains  should  be  allowed  to  enter. 

There  is  nothing  in  the  doctrine  of  common  ownership 
of  land  antagonistic  to  the  view  that  each  individual, 
under  the  law,  should  hold  and  till  the  land,  possess  and 
enjoy  without  molestation  the  fruits  of  his  labor.  It  only 
denies  him  the  privilege  of  seizing  and  holding  land  which 
he  will  not  use  himself  nor  permit  others  to  use.  Neither 
will  it  permit  him  to  take  possession  of  nature's  riches 
and  force  others  who  are  entitled  to  their  part  to  pay  him 


38  THE  WAY  OUT 


an  exorbitant  price  in  order  to  get  them.  To  assume  that 
the  Creator  placed  minerals,  metals,  and  oils  in  the  bowels 
of  the  earth  to  be  the  exclusive  property  of  a  few  of  his 
creatures,  thus  creating  a  private  interest  in  these  essen- 
tials of  human  progress  and  happiness,  denies  at  once  the 
sublimity  of  His  character  and  brands  Him  as  the  author 
of  injustice.  Let  us  suppose  that  there  existed  a  tropical 
country  that  produced  spontaneously  everything  neces- 
sary to  the  support  and  happiness  of  the  population. 
Would  there  be  any  justice  in  a  system  that  permitted  a 
part  of  the  inhabitants  to  monopolize  these  natural  gifts 
and  impose  upon  the  rest  the  terms  upon  which  they 
might  participate  in  the  provision  that  nature  had  made 
for  all? 

Effects  of  pri-     A  contrast  of  the  two  theories  brings  out  the 
vate  ownership  saiient  points.    Under  the  doctrine  of  vested 
an  '  rights  land  is  made  property,  hence  has  ex- 

change value.  This  makes  it  the  subject  of  purchase  and 
sale  and  introduces  fluctuation,  which  induces  specula- 
tion. It  follows  tEat  land  will  be  bought  for  no  other  pur- 
pose than  to  reap  the  advantage  of  increased  value.  The 
result  of  this  is  to  curtail  the  use  of  land.  This  is  accom- 
plished in  two  ways:  first,  by  holding  land  out  of  use, 
second,  by  increasing  the  price  of  land,  thus  making  it 
more  difficult  to  those  wishing  to  put  it  to  proper  use  to 
do  so  on  account  of  the  increased  amount  of  reserve  cap- 
ital necessary  to  accomplish  the  object.  One  wishing  to 
farm  twenty  acres  may  have  sufficient  reserve  to  furnish 
all  the  necessary  teams,  tools,  and  food  supply  but  has 
nothing  to  pay  for  land,  hence  is  debarred  from  engaging 
in  production.  If  he  rents  the  land  from  the  owner  he 
must  give  a  part  of  his  production  for  the  privilege  of 
working.  There  is  nothing  better  established  than  that 
the  laborer  exerts  himself  in  the  proportion  that  he  re- 


LAND 39 

ceives  the  result  of  his  labor,  hence  the  ownership  of  land 
by  others  than  the  person  doing  the  work  is  a  repressing 
influence  upon  production  itself. 

Effect  of  The  effect  of  land  having  value  is  to  reduce 

land  value.  the  number  of  independent  laborers  and 
correspondingly  to  increase  the  dependent  class.  It 
abridges  the  opportunity  to  till  the  land  upon  terms  that 
admit  of  the  laborer  receiving  the  full  measure  of  reward 
and  swells  the  number  of  laborers  who  must  of  necessity 
apply  their  force  to  land  by  permission,  in  return  for 
which  they  must  surrender  a  part  of  the  production.  The 
direct  result  of  this  is  to  create  a  dependent  class  who,  if 
born  with  equal  rights,  loses  them  in  early  infancy.  The 
general  effect  of  this  erroneous  policy  may  be  seen  in  the 
large  area  of  uncultivated  fields  which  might  be  held  in 
small  quantities  by  thousands  who  would  hail  the  oppor- 
tunity of  having  a  home  where  they  might  live  on  the 
fruits  of  their  labors. 

Considering  land  as  property  gives  it  a  prospective 
value  that  is  taken  into  consideration  and  forms  a  certain 
part  of  the  present  worth,  thus  tending  to  make  land 
more  valuable  than  the  present  demand  for  use  would 
justify.  The  immediate  effect  of  high  land  value  is  con- 
gestion of  population.  In  the  hamlet  where  land  is  cheap 
the  humblest  have  yards  in  which  children  may  play  and 
enjoy  the  fresh  air,  but  in  the  large  cities  where  every 
inch  of  ground  represents  a  high  value,  the  poor  are 
stowed  away  in  hovels  like  sardines  in  a  box  and  even  the 
wealthy  have  to  practice  economy  in  ground. 

High  land  value  acts  as  a  repressive  influence  on  de- 
velopment. If  the  land  cost  ten  thousand  dollars  and  the 
building  cost  the  same  it  is  clear  that  no  one  can  build 


40  THE  WAY  OUT 


who  cannot  command  the  combined  sum.  If,  however, 
the  land  cost  nothing,  it  would  require  only  one-half  the 
amount  to  produce  the  same  result.  The  tendency  to 
overcrowd  in  cities  is  in  large  measure  attributable  to  the 
policy  of  making  land  property.  It  is  manifest  that 
under  such  circumstances  the  rich  would  avail  themselves 
of  this  opportunity  to  oppress  the  poor. 

Go  around  almost  any  town  and  observe  the  unused 
land  which  would  be  sufficient  to  furnish  homes  and  gar- 
dens for  thousands  who  are  yearning  for  a  spot  upon 
which  they  can  locate  their  families,  which  are  now  com- 
pelled to  live  in  dens  of  immorality  and  vice.  .These  un- 
sanitary and  sordid  abodes  of  squalor  and 

Infamy  of  .          * 

human  greed  misery  demonstrate,  as  perhaps  nothing  else 
can,  the  baseness  and  infamy  of  human 
greed.  It  really  seems  that  man,  for  it  is  an  indictment 
of  the  race,  will  cling  to  the  unjust  advantage  though  it 
sink  a  part  of  the  human  family  into  perdition.  If  the 
waste  lands  around  almost  any  city  were  open  to  cultiva- 
tion there  could  be  produced  upon  them  a  large  part  of 
the  food  supply  of  that  city. 

The  business  world  has  long  since  realized  the  truth 
of  this  doctrine,  and  communities  in  conformity  to  it  offer 
free  sites  to  enterprises.  If,  then,  the  principle  of  private 
monopoly  in  land  is  inimical  to  progress  and  places  a 
burden  upon  enterprise,  it  clearly  becomes 
the  duty  of  society  to  substitute  a  better 
doctrine. 

The  theory  that  land  is  a  common  heritage  created  by 
a  just  God  for  the  benefit  of  all  His  people  gives  quite 
different  results.  Under  this  conception  land  has  abso- 
lutely no  exchange  value;  it  can  neither  be  bought  nor 


LAND 41 

sold.  No  one  cares  whether  or  not  a  given  place  will  be 
important  ten  years  from  now.  The  interest  in  land  is 

confined  to  questions  of  present  use.    If  no 

£  ,       present  use  can  be  found  for  it,  it  excites  no 

inland  further  interest  and  it  is  left  free  for  the 

next  comer  who  will  decide  the  question  of 
occupancy  of  it  upon  grounds  of  utility.  Under  this 
theory  the  barren  fields  and  lots  in  and  near  cities  would 
disappear  as  if  by  magic.  Laborers  would  come  forward 
anxious  to  use  them  for  purposes  of  dwellings  or  gardens. 
Where  the  unsightly  lot  now  lies  belonging  to  some  estate 
in  process  of  legal  spoliation  which  may  cover  a  period 
of  many  years,  there  would  spring  into  existence  a  smil- 
ing garden  pleasing  to  the  eye,  furnishing  fresh  food  to 
hungry  children  that  under  present  conditions  must  exist 
upon  meager  rations. 

If  the  human  family  could  only  be  made  to  see  the  evils 
growing  out  of  this  unjust  system — a  conventional  Mo- 
loch feeding  upon  the  weaker  members  of  society — it 
would  wipe  it  out  of  existence.  Man  is  gregarious.  He 
prefers  to  live  in  communities.  There  are  manifold  ad- 
vantages in  the  cooperation  that  this  makes  possible,  and 
if  this  matter  of  common  right  in  land  could  be  rightly 
adjusted  it  would  increase  the  possibility  of  concerted 
action  and  greatly  augment  the  stimulus  so  necessary  to 
social  elevation.  It  is  true  that  the  destruction  of  mo- 
nopoly in  land  would  injure  pecuniarly  those  now  receiv- 
ing the  benefit  of  the  unjust  exaction,  but  even  that  would 
be  more  than  repaid  by  the  moral  elevation  of  the  whole 
that  would  follow  the  introduction  of  the  more  ethical 
practice.  We  flatter  ourselves  that  we  have  advanced, 
that  we  have  developed  beyond  the  evil  that  assailed  our 


42  THE  WAY  OUT 


progenitors  in  the  dark  ages.  Is  this  true  except  in  de- 
gree? Have  we  destroyed  the  principle  upon  which  those 
ancient  abuses  rested? 

Feudal  tenure.  In  feudal  times  the  holder  of  land  held  it 
subject  to  military  service,  the  fee  remaining  in  the  lord. 
What  difference  in  principle  exists  between  the  lord  of 
feudal  times  and  the  holder  in  fee  simple  of  to-day?  Ab- 
solutely none.  Vassalage,  though  refined,  still  remains. 
One  class  is  still  the  servant  of  another  class.  If  land  had 
no  exchange  value  there  are  few  cities  that  could  not  be 
supported  by  the  product  of  the  vacant  ground  within 
and  around  the  corporate  limits.  Once  give  it  exchange 
value,  the  amount  of  capital  required  to  hold  it  is  in- 
creased to  the  extent  that  but  few  can  be  proprietors  and 
the  cost  of  operation  is  so  advanced  that  the  margin  for 
the  agricultural  wage  disappears.  The  result  is  that  the 
tiller  of  the  soil  is  driven  back  to  more  remote  regions 
where  the  exchange  value  of  land  is  not  so 
Production  great.  Surely  it  must  be  a  mistaken  policy 
dnven  farther  ^^  Drives  production  away  from  the  point 

from  point  of  .J 

need  oi  greatest  need.     There  is  certainly  room 

for  honest  inquiry  when  the  effect  of  any 
policy  makes  the  distance  greater  between  production 
and  consumption.  They  are  twin  sisters.  The  closer 
they  are  together  the  better  for  both. 

The  greatest  blessing  resulting  from  improved  methods 
of  transportation  is  the  facility  for  bringing  the  produc- 
ing and  consuming  elements  of  society  into  closer  rela- 
tion. There  are  many  advantages  to  be  derived  from  ag- 
gregation that  cannot  be  had  from  sparsely  settled  com- 
munities, and  the  removal  of  the  evils  that  have  hitherto 
impaired  urban  growth  would  likely  lead  to  an  advanced 
civilization  that  is  now  impossible. 


_  LAND  _  43 

It  is  the  idealist  only  who  fancies  that  these  things  can 

be  brought  about  easily.    They  must  come, 

Evolutionary      jf  at  fae  slower  but  surer  methods  of 


methods  of         evolution.    The  enlightening  and  uplifting 

correction.  .    a  i      j  '"     T-  ^     ^ 

influences  of  education  must  smooth  the 
rough  places  and  the  birth  of  the  new  era  must  be  by 
stages.  In  vain  will  the  ignorant  and  impatient  expect 
the  benefits  of  this  change  to  come  by  harsh  and  revolu- 
tionary methods.  It  is  one  thing  to  subscribe  to  a  broad 
principle  but  quite  another  to  construct  the  methods  of 
transition  from  one  premise  to  the  other.  Many  ways 
have  been  suggested  for  the  cure  of  land  monopoly. 
Among  them  have  been  included  everything  from  the  an- 
archistic theory,  which  would  destroy  all  law  and  the 
rights  enjoyed  under  it,  to  the  single  tax  plan  of  Henry 
George. 

If  permanent  and  satisfactory  results  are  to  be  ex- 

pected, whatever  is  done  should  be  done  by  the  people 

acting  through  their  own  organization,  the  government. 

All  steps  taken  in  this  direction  should  be  of 

Conservative  .  r,  TTT,  ..     .   ., 

methods  best  a  tentative  character.  While  fully  commit- 
ting themselves  to  the  principle,  the  people 
should  be  cautious  and  conservative  in  its  application.  If 
the  man  is  sick  and  the  doctor  is  absolutely  sure  of  both 
his  diagnosis  and  the  proper  remedy,  he  is  careful  to 
graduate  the  dose  to  suit  the  physical  condition  of  the 
patient  and  thus  restore  him  by  degrees  without  incur- 
ring the  risk  of  dangerous  reactions.  The  government's 
taxing  power  does  not  commend  itself  as  the  proper  agent 
for  curing  this  evil.  The  proper  use  of  this  power  is  to 
collect  revenue,  and  any  other  application  of  it,  even 
though  with  benevolent  intent,  is  apt  to  result  in  a  pros- 
titution of  power  and  an  imposition  upon  the  people. 
Perhaps  the  best  point  of  attack  in  the  case  under  discus- 


44  THE  WAY  OUT 


sion  will  be  found  in  monopoly  holdings  of  lands,  wells, 
and  forests.  The  industrial  evolution  has  proceeded  far 
enough  in  these  things  under  private  initiative  to  demon- 
strate, not  only  the  desirability,  but  the  urgent  need  of 
making  this  change.  Beginning  thus  with  the  large  units 
of  production  necessarily  monopolistic  in  character,  ex- 
perience will  indicate  the  necessary  expansion  of  the 
principle. 


CHAPTER  III. 

PRODUCTIVE  LABOR. 

labor,  the  The  correlation  of  man's  energy,  mental  and 
law  of  being.  physical,  for  the  purpose  of  production,  rep- 
resents his  effort  to  conform  to  the  law  of  being  which 
makes  life  depend  upon  exertion.  This  energy  may  be 
divided  into  mind  force  and  material  force.  They  are 
both  present  in  the  make-up  of  every  normal  individual 
varying,  of  course,  in  degree  and  intensity. 

The  erroneous  classification  that  allots  mental  force  to 
one  class  of  workers  and  physical  force  to  another  is  re- 
sponsible for  much  of  the  confusion  of  thought  and  mis- 
understanding that  exist  on  this  subject.  There  is  no 

exertion  of  physical  force,  if  it  is  to  be  pro- 
Forces  of  /.         i,     ,,  •      .11 
mind  and  body    uuctive  oi  results,  that  does  not  require  the 

exercise  of  the  mind  power  of  the  worker. 

The  more  intelligently  physical  force  is  applied  the  more 

effective  it  becomes.    The  invention  of  the 

plan  may  call  for  only  mental  effort  but  the 

in  proportion  ,-*/?•,  •  •         £  i_   J.T. 

to  intelligence    execu^ion  of  it  requires  the  exercise  of  both 
mind  and  body,  even  in  the  most  inconse- 
quential particular. 

Manifestly  any  arbitrary  division  of  human  beings 
into  two  classes,  the  one  using  the  mind  and  the  other  the 
muscles  is  entirely  at  variance  with  the  facts  of  the  case. 
It  follows  that  deductions  drawn  from  such  an  unsound 
premise  would  most  likely  be  erroneous.  In  the  world's 
workshop  there  is  need  for  some  whose  tasks  will  require 
a  larger  degree  of  mental  effort  while  others  will  be  called 
upon  for  a  larger  share  of  physical  energy.  In  all  cases, 
however,  each  worker  must  employ  both  if  he  is  to  be 
effective.  Whether  the  individuals  use  their  heads  or 

45 


46  THE  WAY  OUT 


their  hands  most  does  not  alter  the  fact  that  all  of  them 
are  co-laborers  in  doing  the  world's  work. 

Mental  and  physical  powers  may  be  considered  as  the 
positive  and  negative  elements  of  man's  make-up.    Both 
are  powerful  when  combined.    They  are  essential  to  each 
other  and  when  normal  act  in  harmony.    Each  is  fruit- 
less by  itself.     The  mind  force  plans,  and 

Theory  and  i       •      i     /?  •      j.r. 

practice  physical   force   executes;   the   one   is   the 

theory,  the  other  the  practice ;  the  one  gives 
the  law,  the  other  executes  it.  They  must  act  together 
because  the  law  unexecuted  is  only  a  mental  conception, 
while  execution  without  conformity  to  law  is  only  chaotic 
disturbance. 

When  these  forces  are  acting  in  harmony  the  mind 
plans,  organizes,  and  directs,  while  the  physical  force 
acting  under  instruction  makes  the  implement  and  wields 
it  to  bring  about  the  change  of  form  in  substance  that 
we  designate  as  production. 

Man  without  Man  with  all  his  boasted  wisdom  has  abso- 
creative  power.  iutely  no  creative  power.  He  is  surrounded 
on  all  sides  by  the  impassable  barrier  of  natural  law. 
His  highest  accomplishment  is  found  in  the  exercise  of 
his  inventive  faculty  that  searches  out  and  comprehends 
the  law,  making  such  an  application  of  it  as  will  result  in 
facilitating  the  change  of  matter  from  unavailable  to 
available  forms. 

The  effort  to  harness  the  forces  of  nature  and  cause 
them  to  serve  man  is  peculiarly  the  work  of  the  mind, 
which  is  simply  endeavoring  to  relieve  the  body  of  the 
burden  and  drudgery  of  physical  labor.  Nature's  stores 
are  boundless  and  indestructible.  In  this  laboratory  man 
may  carry  matter  through  all  its  varied  forms  in  prepa- 
ration for  such  beneficial  uses  as  investigation  and  ex- 


PRODUCTIVE  LABOR 47 

perience  may  have  indicated.     This  is  the 

Man's  impera-      f  ,.  „  -_.      ,    ,    ,       , 

tive  duty  imperative  duty  of  man.     Mental  develop- 

ment tends  to  an  improvement  of  methods 
and  the  invention  of  new  processes  that  serve  to  increase 
the  effectiveness  of  labor. 

The  social          Regarding  society  as  a  single  unit  each 
umt-  member  of  it  comes  under  an  obligation  to 

do  his  part  effectively,  since  the  success  of  the  whole  is 
dependent  upon  securing  the  proper  results  from  each 
component  part.    It  should  be  remembered, 

Two  classes          ,  ,/  •  ,       •  n       T    •  i    i 

of  society  however,  that  society  is  naturally  divided 
into  two  classes;  the  one  self-supporting  or 
capable  of  self-support,  the  other  dependent.  To  the 
former  must  be  applied  the  socialistic  principle  of  distri- 
bution, giving  to  each  individual  as  nearly  as  may  be  the 
part  of  the  production  contributed  by  him,  while  the 
latter  must  share  according  to  the  communistic  principle 
that  takes  from  the  strong  a  part  of  his  production  and 
distributes  it  to  the  dependent  according  to  the  need. 
_.  ,  .  The  children,  the  weak,  and  the  aged  are  the 

Wards  of  _,    .  ?  .    ,      . 

communism.  wards  of  communism.  It  is  society's  duty 
to  provide  for  this  class  either  through  the 
agency  of  the  family,  the  locality,  or  the  State,  and  no 
harm  comes  from  it  so  long  as  such  provision  is  confined 
to  the  genuinely  dependent.  These  non-workers  must 
be  excepted  from  the  laboring  class.  Those  who  eat  yet 
work  not  but  live  upon  the  income  on  capital,  whatever 
classification  they  make  for  themselves,  do  as  an  eco- 
nomic fact  belong  to  the  dependent  class  and  are  charges 
on  the  workers. 

Not  only  must  laborers  work  but  they  must  do  so  effi- 
ciently.    In  order  to  meet  this  requirement 
work  one  must  devote  both  time  and  talent  to  the 

accomplishment  of  the  task  in  hand,  avoid- 
ing either  extreme  of  overwork  or  underwork.  The  goal 


48  THE  WAY  OUT 


to  be  reached  is  the  maximum  production  for  the  amount 
of  energy  that  can  be  expended  without  overtaxing  the 
worker,  since  this  would  dissipate  the  reserve  force  neces- 
sary to  keep  him  in  proper  condition  to  continue  his 
efforts.  It  is  not  intended  that  the  worker  should  be  con- 
sidered a  mere  machine  to  be  kept  in  repair  and  operated 

until  worn  out.  He  is  a  machine  and  a  very 
of  man**  y  complex  one  but  he  is  more  than  that,  he  is 

a  human  being,  and  mere  physical  produc- 
tion is  only  a  method  of  providing  means  for  that  more 
important  result  of  developing  the  mind  and  soul  with 
which  the  father,  the  mother,  the  citizen,  should  be  en- 
dowed. 

"In  the  sweat  of  thy  face  shalt  thou  eat  bread"  was  not 
a  curse  put  upon  man  but  one  of  God's  choicest  blessings. 
This  apparently  stern  necessity  contains  the  elements  of 
man's  success,  yea,  his  salvation.  Honest  work  is  at  once 
the  most  important  factor  in  human  development.  Not 
only  must  man  work  efficiently,  but  what  is  of  equal  im- 
portance, he  must  do  so  in  accord  with  the 

Demands  of  ,  ,       „     >*T,         Tj»     •    •!•      j_«        •  j 

utility  demands  of  utility.    If  civilization  is  to  ad- 

vance, the  workers  must  conform  more  and 
more  closely  to  the  requirements  of  utility.  Since  what 
is  one  man's  food  is  another's  poison,  the  task  of  drawing 
an  exact  line  between  work  of  utility  and  that  of  non- 
utility  is  exceedingly  difficult,  not  to  say  impossible.  The 
establishment  of  the  doctrine  that  utility  should  govern 
the  selection  of  the  kinds  of  things  to  be  produced,  or  at 
least  be  an  important  factor  in  the  decision,  is  perhaps  all 
that  can  be  hoped  for. 

In  a  general  way,  the  thing  may  be  said  to  be  of  utility 
if  its  use  increases  the  average  good  of  man  while  pro- 
ductions that  do  not  measure  up  to  this  standard  may  be 
said  to  be  of  non-utility.  In  the  exchange  of  labor  it  may 


PRODUCTIVE  LABOR 49 

occur  that  one  party  to  the  exchange  gives 
utmty  °  work  of  utility  for  that  of  non-utility.  The 

man  making  rum  may  exchange  it  with  the 
woodchopper  for  wood,  thus  exchanging  a  work  of  non- 
utility  for  one  of  utility  and  transferring  the  economic 
loss  from  the  rum  maker  to  the  woodchopper.  The  owner 
of  a  house,  in  building,  exchanges  with  the  carpenter  and 
other  workers  products  of  utility  for  others  of  the  same 
kind  in  so  far  as  the  building  may  be  in  accord  with  the 
demands  of  utility,  but  all  parts  which  may  be  in  excess 
of  those  requirements  represent  an  economic  loss  to  the 
owner. 

Economic          This  economic  waste  is  especally  noticeable 
waste.  jn  the  construction  of  buildings  for  public 

use.  Instead  of  these  buildings  being  in  accord  with  the 
simple  demands  of  utility,  which  look  mainly  to  the  prac- 
tical use  to  which  they  are  to  be  put,  in  many  cases  the 
cost  of  the  unnecessary  appears  to  exceed  the  cost  of  the 
useful.  Charity  is  preached  in  buildings,  the  construction 
of  which  involves  a  waste  that  would  go,  if  saved,  a  long 
way  towards  alleviating  distress  that  might  not  exist  at 
all  if  the  economic  law  had  not  been  violated.  When  it  is 
considered  that  work  of  non-utility  is  a  waste  of  effort, 
hence  a  loss  to  humanity,  it  becomes  obvious  that  such 
losses  are  transferred  from  the  stronger  to 

the  weaker.  This  shifting  process  con- 
ferred to  the  ,.  ,.,  n  1, 

weak  tinues  until  the  burden  finally  rests  upon 

the  weakest  elements  of  society.  This  being 
true,  the  impoverished  mother  whose  milk  fails  to  furnish 
proper  nutrition  for  the  babe  may  with  justice  look  upon 
the  waste  involved  in  the  construction  of  the  towering 
edifice  as  responsible  in  a  measure  for  her  deprivation. 

With  a  clear  understanding  of  this  economic  process 
it  requires  but  little  stretch  of  the  imagination  to  picture 


50  THE  WAY  OUT 


the  vainglorious  pile  composed  of  brick  and  mortar  to  the 
extent  of  its  utilitarian  use,  while  its  vaulted  domes  and 
towering  spires  are  artistically  constructed  of  the  inter- 
woven bones  of  dead  infants  who  have  fallen  victims  to 
this  violation  of  economic  law. 

The  cry  is  for  ornament,  but  when  we  look  through  the 
gaudy  curtain  and  see  conditions  as  they  really  are,  the 
tragedies  and  the  suffering,  the  momentary  pleasure  to 
the  eye  and  the  gratification  of  exulting  pride  little  com- 
pensate for  the  sickness  of  soul  that  seizes  us.  The  disre- 
gard of  the  demands  of  utility  runs  through  society;  it 
shows  in  architecture,  the  dress,  the  equipage,  and  even 
in  the  funeral  procession. 

It  is  entirely  true  that  man  cannot  live  by  bread  alone, 
B  for  there  is  implanted  in  him  a  love  of  the 

useful71  beautiful  which  must  of  necessity  find  its 

expression  in  the  products  of  his  hand.  It  is 
well,  however,  to  remember  that  there  is  no  antagonism 
between  simplicity  and  beauty.  It  too  often  occurs  that 
the  ornate  and  gaudy  are  the  products  of  the  attempt  to 
create  the  beautiful  rather  than  the  beautiful  itself. 
Beauty  has  its  use,  nor  need  it  be  at  the  expense  of  utility. 

There  is  no  economic  reason  why  things 
Ugliness  not  1111  •  i  ^i  i  j_i 

a  virtue  should  be  unsightly,  but  on  the  contrary, 

there  are  many  reasons  why  they  should  be 
as  comely  as  possible.  It  is  here  insisted  only  that  the 
standard  of  the  esthetical  shall  conform  as  closely  as  pos- 
sible to  good  taste  and  good  sense.  When  the  lady's  hat 
is  composed  of  a  few  dollars'  worth  of  material  designed 
to  give  comfort  and  protection  and  many  dollars'  worth 
of  plumes,  appendages  and  gewgaws  that  would  do  credit 
to  a  savage  belle,  there  arises  a  serious  doubt  as  to  the 
wisdom  and  propriety  of  the  construction. 


PRODUCTIVE  LABOR 51 

Much  of  the  effort  at  ornamentation,  instead  of  being 
due  to  the  love  of  the  beautiful  is  much  more  likely  to 
stand  out  as  the  manifestation  of  that  silly 
vanity  that  would  appeal  to  the  admiration 
of  some  and  to  the  envy  of  others.    Women  are  perhaps 
in  this  respect  most  culpable.     The  extravagant  debu- 
tante of  to-day  differs  but  little  from  her  uncivilized 
sister  of  the  plains  who  with  her  tinsel  and  red  shawl  sits 
in  state  to  receive  the  adulation  of  her  votaries. 

It  is  to  be  hoped  that  man  may  advance  to  the  point 
that  dress  may  be  for  comfort  and  health ;  when  the  build- 
ings will  be  erected  for  the  use  to  which  they  are  to  be 
devoted ;  and  churches  will  be  constructed  for  the  purpose 
of  furnishing  accommodation  to  those  who  attend  them 
to  hear  the  exposition  of  God's  law.  When  this  stage  has 
been  reached  the  church  building  will  likely  be  regarded 
as  so  much  brick  and  mortar  put  to  a  good 

The  temple  _5  * 

of  God  use  rather  than  a  sacred  edifice  reared  in 

honor  of  the  Creator,  and  its  attendants  will 
realize  more  clearly  than  now  that  the  true  temple  of  God 
is  within  themselves  and  that  its  adornments  must  con- 
sist in  the  development  and  consecration  of  their  own 
social  and  spiritual  lives. 

Signs  of  No  surer  sign  of  decadence  in  a  nation  could 

decadence.  exjst  than  that  evidenced  by  an  increasing 
tendency  to  indulge  in  things  of  non-utility.  The  nations 
that  offer  the  widest  selection  in  objects  of  former  splen- 
dor as  a  rule  evince  the  greatest  lack  of  ability  to  keep 
abreast  of  present  progress.  When  one  considers  the 
immense  amount  of  waste  involved  in  gratifying  the 
unwise  wants  of  the  world  it  is  astonishing  that  the  evil 
effects  are  not  more  in  evidence  than  they  are. 


52  THE  WAY  OUT 


The  power  of  appropriation  of  nature's  products  is 
common  to  both  man  and  beast.    The  divid- 
ing line  between  them  seems  to  start  where 
and  beast  ^e  exhaustion  of  the  naturally  prepared 

food  supply  begins.  The  beast  can  go  no 
farther  and  starvation  begins  its  remorseless  task  of  ad- 
justing the  numbers  to  be  sustained  to  the  available  food 
supply.  Animals,  with  the  exception  of  the  few  that 
store  food,  consume  the  available  supply  and  make  no 
provision  for  future  needs.  Man,  on  the  contrary,  on 
account  of  his  superior  intelligence  and  foresight,  not 
only  avails  himself  of  the  bounty  which  nature  has  pre- 
pared but  develops  the  power  to  facilitate  the  change  of 
matter  into  desired  forms  that  serve  as  means  of  future 
subsistence.  He  not  only  consumes  the  berry  but  he 
transplants,  fertilizes,  and  cultivates  the  vine  and  in- 
creases the  quantity  of  berries.  He  takes  the  unavailable 
matter  and  changes  it  into  such  forms  as  will  make  it 
capable  of  being  assimilated.  The  more  intelligently 
man  assists  nature  in  the  transformation  of  matter  the 
more  clearly  is  the  differentiation  between  him  and  the 
lower  animals  established. 

In  primeval  times  when  man  roamed  wild,  digging 
roots  with  his  fingers  and  eating  the  wild  berries,  there 
was  little  difference  between  him  and  his  cousin-german, 
the  monkey.  When  his  intelligence,  however,  had  de- 
veloped sufficiently  to  enable  him  to  harness  the  falling 
waters  and  bridle  the  lightning,  thus  compelling  the 
natural  energies  to  do  his  bidding,  he  soon  outstripped 
his  kinsman. 

Since  labor  is  absolutely  essential  to  augmented  pro- 
duction and  since  this  form  of  production  is  the  distin- 
guishing feature  between  man  and  the  brute,  it  becomes 


PRODUCTIVE  LABOR  53 


the  moral  duty  of  man  to  labor  and  fulfill 

Man's  moral  J 


.          . 

duty  to  labor.     ™e  law  °*  ^1S  being  in  order  that  he  may 

rise  superior  to  the  brute  creation.    He  who 

violates  this  law  of  labor,  in  the  degree  that  he  does  so 

must  lose  those  high  qualities  of  mind  that  obedience  to 

it  superinduces  and  become  bestial  in  character.    The  old 

adage  that  an  idle  brain  is  the  devil's  workshop  is 

founded  upon  this  truth.    It  follows  that  he 

pauperism  w^°  e^es  ou^  an  existence  without  comply- 
ing with  the  law  of  labor,  having  the  ability 
to  conform,  is  either  a  robber  or  a  pauper.  Either  he 
takes  that  which  does  not  belong  to  him  or  lives  upon  the 
charity  of  others. 

Cooperative       Not  only  is  it  man's  duty  to  labor,  but  he 
labor.  must  labor  effectively.     The  penalty  for 

both  idleness  and  non-effective  labor  is  want.  From  the 
premise  that  the  law  of  being  is  effective  labor,  it  follows 
that  men  should  labor  together  when  the  joint  action 
would  give  more  effective  results  than  individual  effort. 
The  reason  for  combination  is  found  here.  To  this  law 
all  cooperation  owes  its  origin,  and  so  long  as  it  results  in 
effectiveness  its  foundation  is  indestructible.  A  success- 
ful effort  to  destroy  it  would  move  the  hand  of  progress 
backward,  degrade  mankind  and  destroy  the  hope  of  ele- 
vating humanity  to  that  plane  of  useful  achievement 
which  its  endowments  make  possible.  In 
labor  obedience  to  the  law  of  effectiveness  it  be- 

comes man's  duty  to  eliminate  all  ineffective 
labor  because  it  is  an  economic  loss  that  must  react 
upon  all. 

Any  improvement  in  machinery  or  readjustment  of 
labor  that  gives  more  effective  results  is  in  accord  with 
the  law  of  man's  being  and  will  contribute  to  his  advance- 
ment. In  this  social  laboratory  of  the  world  in  which 


54  THE  WAY  OUT 


mankind  is  engaged  in  the  transformation 
of  matter  from  unavailable  to  available 
forms  each  individual  has  his  task.  Yet  all 
are  definitely  and  vitally  concerned  in  the 
character  and  efficiency  of  each  part  of  the  work.  Run- 
ning through  the  whole  operation  is  a  common  interest 
in  the  final  outcome.  This  common  interest  rests  upon 
broad  ethical  grounds.  Necessity  has  driven  man  to  em- 
ploy joint  effort  because  a  higher  degree  of  efficiency  was 
imperative. 

Effectiveness  is  the  touchstone  by  which  all  labor, 
whether  individual  or  collective,  must  be  tested.  If  labor 
is  non-utilitarian  in  character,  or  if  utilitarian,  yet  not 
in  the  highest  degree  effective  on  account  of  deficiency  in 
effort  or  lack  of  proper  organization,  it  stands  condemned 
under  the  economic  law  either  as  a  waste  of  effort  or  a 
partial  waste  which  inflicts  injustice  upon  society.  In 

such  case,  this  labor  should  be  diverted  into 
Better  adjust-  ,  ,  .  . 

ment  of  labor.     Pr°Per  channels  or  brought  up  to  the  re- 
quired standard  of  efficiency.    Many  things 
indicate  that  there  exists  an  overruling  necessity  that 
compels  man  to  conform  to  the  requirements  of  natural 
law.    This  fact  suggests  the  query  whether  without  this 
compelling  necessity  social  evolution  could 

Social  necessity   eyer  take     }a^      R  appearg  probable  that 
forces  the  evo-      . ,      ,  «       MI  j  -i  TJ.J-I 

lution  forward.  the  human  family  has  advanced  very  little 
farther  than  circumstances  have  compelled 
it  to  go.  It  is  not  improbable  that  the  creation  is  moving 
to  the  fulfillment  of  a  preordained  plan  which  may  leave 
to  man  the  restricted  choice  of  following  it  under  the  di- 
rection of  reason,  or  being  compelled  to  go  to  the  same 
objective  under  the  lash  of  a  relentless  necessity.  If  this 
assumption  be  true,  it  furnishes  the  reason  for  the  revo- 
lutionary outbursts  that  take  place  from  time  to  time> 
bringing  about  fundamental  changes. 


PRODUCTIVE  LABOR 55 

Necessity  forces  man  to  conform  to  the  law  of  effi- 
ciency, and  the  more  imperative  the  need  the  closer  the 
conformity.  When  the  stage  coach  was  the  method  of 
transporting  passengers  the  loss  of  a  few  hours  was  not 
a  matter  of  much  importance,  but  when  the  great  trunk 
lines  came,  operating  under  the  necessity  of  making  their 
connections  at  fixed  times,  it  became  necessary  to  count 
the  minutes.  The  merchant  at  the  country  crossroads 
may  entertain  his  customers  with  discussions  of  current 
affairs,  but  when  he  changes  his  location  to  the  metropolis 
and  undertakes  to  serve  the  throngs  that  he  finds  there  he 
comes  under  the  necessity  of  adopting  methods  that 
admit  of  little  diversion. 

Combined  effort  not  only  makes  possible  greater  effec- 
tiveness but  compels  it,  and  the  larger  the  aggregation 
the  greater  the  compulsion.  The  small  band  may  straggle 
but  the  large  army  must  move  by  rule. 

As  man  is  brought  into  closer  relationship,  interde- 
pendence grows  greater  and  the  need  of  closer  conformity 
to  the  law  of  effectiveness  becomes  impera- 
™  tive.    The  origin  of  this  increased  effective- 

origin0  ness  *s  *n  ^e  mind,  hence  the  more  it  is  en- 

lightened the  greater  will  be  the  incentive 
to  conform;  therefore,  an  enlightened,  educated  people 
will  produce  more  than  the  ignorant.  The  former,  realiz- 
ing the  benefits  to  be  derived  from  a  labor-saving  device 
will  quickly  adopt  it,  and  will  as  readily  effect  a  readjust- 
ment of  labor  if  by  so  doing  the  greater  effectiveness  can 
be  secured,  because  they  appreciate  the  fact  that  in- 
creased production  results  in  the  promotion  of  the  gen- 
eral welfare.  An  ignorant  people  will  refuse  such  im- 
provements upon  the  theory  that  they  will  decrease  the 
amount  of  labor  to  be  done,  thereby  depriving  the  la- 
borers of  a  part  of  their  opportunity.  The  former  realize 


56  THE  WAY  OUT 


that  production  is  the  desideratum,  while  the  latter  place 
the  stress  upon  the  opportunity  to  labor  rather  than  upon 
results  to  be  obtained  from  it. 

To  state  the  case  differently:  the  difference  between 
the  man  and  the  brute  is  the  former's  power  to  change 
the  form  of  matter  so  as  to  make  it  available  for  the  sup- 
port of  life.  Man's  power  of  augmenting  production 
comes  from  his  superiority  of  mind.  The  greater  the 
facility  he  displays  for  the  accomplishment  of  the  purpose 
the  higher  he  rises  above  the  brute.  As  his  intelligence 
expands  he  demands  a  continual  elimination  of  the  un- 
necessary, a  better  adjustment  of  the  productive  units, 
and  a  combination  of  forces  when  this  is  more  effective 
than  single  effort.  When  these  more  efficient  methods 
are  available,  making  possible  the  accomplishment  of 
greater  results  in  shorter  time,  it  is  an  economic  crime  to 
impose  this  loss  upon  society. 

By  combination  all  can  have  the  benefits  of  certain 
results  that  none  can  have  if  the  workers  continue  to  act 
individually.  The  deduction  from  this  is 

that  the  law  of  collective  effort  is  m^tual 
benefit  effort  for  mutual  benefit.  The  law  of  being 

requires  that  all  who  are  capable  of  doing  so 
shall  labor  and  that  they  shall  do  so  in  the  most  effective 
manner,  combining  their  efforts  whenever  such  joint 
action  will  result  in  greater  efficiency.  It  will  be  ob- 
served that  there  is  no  place  in  social  economy  for  the 
idler  and  shirker.  He  is  a  social  outcast  against  whom 
compulsory  process  would  be  justifiable. 

Common  The  protection  and  support  of  the  depend- 

responsibiiities   ent  ciasses,  insuring  the  merciful  care  of  the 
weak,  afflicted  and  aged,  and  the  perpetua- 
tion of  the  race,  are  duties  laid  upon  the  shoulders  of  the 
workers.    When  these  duties  have  been  performed,  the 


PRODUCTIVE  LABOR 57 

ethical  principle  requires  that  each  worker  shall  receive 
products  in  proportion  to  his  contribution,  in  other 
words,  that  he  shall  have  as  his  individual  part  that 
which  remains  of  his  own  production  after  meeting  his 
communal  responsibilities.  It  may  be  noted  that  there 
exists  no  social  obligation  to  support  those 

Rich  paupers.  ,,       £   °1- 

who  are  capable  of  self  support,  hence  those 
who  live  upon  incomes  and  do  not  work  enough  to  earn 
what  they  consume  put  themselves  in  the  dependent  class 
and  are  in  an  economic  sense  charges  upon  society  even 
to  a  greater  extent  than  the  inmates  of  a  charitable  insti- 
tution, in  that  the  amount  consumed  by  the  former  is 
larger  than  that  devoted  to  the  support  of  the  latter. 

In  order  to  reach  a  high  standard  of  efficiency  in  pro- 
duction it  is  necessary,  in  addition  to  efficient  labor,  to 
have  a  well  balanced  production,  that  is  to 

Well  balanced  .,  i        •, i  •   i 

reduction        sa^?  ^  must  correspond  with  social 

needs.  When  the  amount  produced  exceeds 
the  amount  necessary  to  satisfy  the  current  wants  and 
provide  against  reasonable  contingencies  it  involves  the 
expenditure  of  labor  for  unnecessary  things  which, 
though  utilitarian  of  themselves,  for  the  nonce  must  be 
placed  in  the  non-utilitarian  class.  If  the  cost  of  the  de- 
terioration and  the  storage  of  these  excess  productions 
until  the  time  comes  for  their  consumption  exceeds  the 
cost  of  new  production,  the  excess  cost  represents  waste 
of  effort.  It  will  be  seen,  then,  that  man  is  under  the  ne- 
cessity of  exercising  judgment  in  the  quantity  of  produc- 
tion of  the  different  products,  if  the  proper  balance  is  to 
be  preserved,  and  the  highest  efficiency  reached.  It  is 
entirely  probable  that  society  may  from  time  to  time 
through  defective  judgment  produce  certain  articles  in 
excess  of  need  and  thereby  disturb  the  economic  balance, 
tut  it  is  entirely  improbable  that  man,  if  his  efforts  are 


58  THE  WAY  OUT 


properly  directed,  will  ever  produce  more  than  he  can 
consume,  for  the  reason  that  his  wants  will  increase  in 
the  proportion  that  goods  are  produced  to  satisfy  them. 
The  cry  of  over-production  is  therefore  misleading.  It 
generally  denotes  either  an  unbalanced  production  or, 
what  is  more  probable,  an  under  consumption  superin- 
duced by  faulty  methods  of  distribution  or  division  of 
benefits. 

The  change  of  ratio  in  the  exchange  value  of  the  differ- 
ent products  is  the  method  of  bringing  production  into 
proper  balance.  That  which  is  under-produced  rises  in 
value  while  that  which  is  over-produced  falls  in  value,  the 
high  value  stimulating  production  and  decreasing  use 
and  the  low  value  repressing  production  and  increasing 
use. 


CHAPTER  IV. 

CAPITALISM. 

Capital.  The  term  capital  will  be  employed  to  mean 

fixed  investments,  other  than  land,  and  the  production 
that  is  available  for  use  out  of  which  loans  and  invest- 
ments are  made. 

Capitalism  Capitalism  is  the  doctrine  that  capital  is 
defined.  entitled  to  a  return  for  its  use.  Expressed 

differently,  capitalism  insists  that  the  owner  of  capital 
shall  be  insured  the  return  of  the  full  amount  of  the  cap- 
ital loaned  or  used,  and  in  addition  be  given  a  considera- 
tion for  the  use  of  it.    The  soundness  of  the  capitalist 
system  depends  upon  the  validity  of  the  claim  for  pay  for 
the  use  of  capital.    If  capital  is  entitled  to  a 
return  for  its  use,  the  doctrine  of  capitalism 

of  capital  ;    . 

pay  hire?  rests  uPon  an  e^hical  foundation,  leaving 
only  the  problem  of  proper  regulation  and 
administration  to  prevent  abuses.  On  the  other  hand,  if 
capital  is  entitled  to  no  return  for  use,  all  payments  for 
such  use  are  necessarily  inethical.  In  such  case  the  cap- 
italist system  must  exist  on  sufferance  and  should  be  dis- 
placed when  and  to  the  extent  that  one  approximating 
more  closely  the  ethical  principle  can  be  substituted  for  it. 

The  questions  at  issue  are : 

First — Is  capitalism  ethically  justified? 

Second — If  capitalism  is  unsound  in  principle,  what 
system  more  ethical  in  its  basic  principles  can  be  devised 
to  take  its  place? 

59 


60  THE  WAY  OUT 


As  cooperation  increased,  necessitating  division  and 
The  need  for  specialization  of  labor,  the  need  ever  grew 
capital.  greater  for  the  aggregation  of  capital  to  be 

used  for  social  purpose.  When  the  unit  en- 
gaged in  social  service  is  small,  the  individual  conducting 
it  may  be  able  to  furnish  the  necessary  capital  out  of  his 
own  savings,  or  by  associating  other  workers  with  him, 
get  the  use  of  their  capital  and  services.  So  long  as  this 
method  suffices  to  furnish  sufficient  capital, 
^e  enterPrise  does  not  necessarily  belong  to 
capitalistic  ^e  capitalist  system,  since  it  can  be  con- 
ducted indefinitely,  carrying  only  a  charge 
for  insurance  and  actual  labor  service.  When  the  units 
increase  in  size  it  becomes  imperative  that  the  surplus 
capital  of  others  shall  be  aggregated  and  employed  in  con- 
ducting the  larger  operation.  The  first  method  for  pro- 
viding this  increased  capital  was  partnership,  under 
which  two  or  more  individuals  combined  their  capitals 
for  a  given  purpose.  So  long  as  the  contributors  of  the 
capital  were  the  actual  workers  in  the  conduct  of  the  op- 
eration the  process  was  fairly  simple,  but  when  the  need 
for  additional  capital  became  still  more  urgent,  a  method 
had  to  be  provided  by  which  the  capital  of  workers  other 
than  those  directly  employed  could  be  attracted  to  the 
operation.  The  inducement  held  out  to  the 

Capitalism.          ,r  £  „ 

investors  was  the  promise  of  an  increase  of 
their  capital,  or,  stated  differently,  the  return  of  the  cap- 
ital itself  and,  in  addition,  payment  of  an  interest  for  the 
use  of  it.  This  point  marks  the  origin  of  capitalism. 

The  inducement  offered  the  investor,  or  rate  of  hire  for 
the  capital,  must  of  course  bear  a  very  close  relation  to 
the  degree  of  supposed  risk  attending  the  conduct  of  the 
business. 


CAPITALISM  61 


These  contributions  to  capital  take  various  forms :  gen- 
eral partnership,  special  partnership,  stock  interest,  com- 
mon or  preferred,  bonds,  notes,  and  open  accounts.  All 
contributions  are  made  with  the  expectation  of  getting  a 
return,  either  from  a  division  of  the  profits  of  the  opera- 
tion or  a  fixed  return,  such  as  limited  dividends  or  in- 
terest. As  already  pointed  out,  the  business  conducted 
by  those  furnishing  all  the  capital  required  out  of  their 
own  savings  can  continue  indefinitely,  adding  only  so 
much  to  the  price  as  may  be  necessary  to  cover  expenses, 
including  in  them  a  fair  consideration  for  the  personal 
services  of  the  partners.  The  increase  of  capital  to  take 
care  of  the  growth  of  the  business  will  in  such  case  be 
limited  to  the  amount  that  the  partners  will  be  able  to 
save  out  of  their  compensation  for  services.  If  more  than 
this  is  required,  it  will  be  necessary  either  to  apply  the 
cooperative  principle  more  broadly  or  to  adopt  the  profit 
principle,  increasing  the  charge  for  the  services  to  yield 
either  a  profit  that  will  swell  the  capital  fund,  or  enable 
the  partners  to  pay  the  hire  of  outside  capital.  The  thing 
Twos  stems  to  ^e  ™Pressed  here  is  that  the  principle 
contrasted.  changes,  and  capitalism  or  some  other 
method  of  aggregation  becomes  necessary 
whenever  the  business  requires  more  capital  than  the 
savings  of  those  actually  employed  in  the  particular  oper- 
ation furnish.  If  two  small  units,  the  workers  in  one  of 
them  furnishing  the  necessary  capital  while  the  other 
hires  it,  are  both  doing  the  same  amount  of  business  with 
equal  efficiency,  it  is  patent  that  the  one  hiring  its  capital 
must  either  pay  a  lower  wage  for  services  or  suffer  a 
diminution  of  capital. 

It  is  possible  that  the  large  unit  with  a  larger  volume 
of  business  can  effect  economic  savings  sufficient  to  cover 
the  hire  of  capital  and  thus  be  able  to  serve  the  public 


62  THE  WAY  OUT 


at  less  cost  than  the  small  unit,  under  no  charge  for  the 
use  of  capital.  The  employment,  then,  of  the  profit  prin- 
ciple, if  it  is  the  only  means  by  which  the  larger  and  more 
effective  operation  can  be  obtained,  may  result  in  cheaper 
and  better  service  than  if  the  small  unit  system  had  con- 
tinued. It  is  upon  this  assumption  that  the  displacement 
of  the  small  units  by  the  large  is  justified.  It  will  be 
noted,  however,  that  the  comparison  in  this  case  is  be- 
tween unequal  things,  and  that  the  more  favorable  show- 
ing of  the  large  unit  employing  the  profit  principle  as 
against  the  smaller  units  operating  under  the  service 
principle  does  not  determine  the  former's  right  to  exist 
except  as  an  expedient — as  a  choice  between  the  less  effi- 
cient and  the  more  efficient.  The  final  test  must  be  be- 
tween units  of  equal  size,  the  one  function- 
ing under  the  service  principle,  the  other 
principles  under  the  profit  principle,  and  the  right  to 
live  accorded  to  that  which  proves  to  be  the 
more  efficient  social  instrument.  It  is  fatuous  to  claim 
that  the  benefits  derived  from  larger  and  more  efficient 
production  are  the  results  of  capitalism.  The  invention 
of  machinery,  increasing  production  and  expediting 
transportation,  was  the  primary  cause  of  the  improve- 
ment over  past  periods.  The  aggregation  of  surplus  cap- 
ital was  the  essential  thing  to  be  accomplished  in  order  to 
make  these  inventions  practicable.  The  ignorance  of 
society  made  it  impossible  in  that  period  to  devise  a 
proper  method  for  gathering  the  necessary  capital,  leav- 
ing it  to  the  more  astute  individuals  to  adopt  one,  and  in 
doing  so  they  very  naturally  adopted  capitalism,  which 
functioned,  not  in  the  interest  of  the  ignorant  mass,  but 
in  that  of  the  few  responsible  for  its  exist- 

Capitalisma  _      .,    ,.  ,  ,.      , 

method  only.      ence-     Capitalism,  then,  is  only  a  method, 
not  a  cause,  which  necessarily  depends  upon 
the  existence  of  a  special  privilege  that  operates  to  the 


CAPITALISM  63 


advantage  of  its  possessors  and  to  the  disadvantage  of  an 
ignorant  society  which  permits  it  to  remain.  Capital  is 
vitally  necessary,  but  capitalism  is  not,  because  it  is  by 
no  means  the  only  method  of  aggregating  capital. 

Necessity  The  law  of  efficient  labor  requires  effective 
for  capital.  efyort  Of  aj}  workers,  their  allotment  to  the 
spheres  in  which  they  can  be  most  productive,  and  the 
proper  division  and  specialization  of  work.  To  accom- 
plish these  purposes  the  aggregation  of  the  requisite 
amount  of  capital  becomes  necessary  so  that  buildings, 
equipment,  machinery,  and  working  capital  may  be  pro- 
vided. 

The  larger  the  unit  of  production  becomes,  the  greater 

the  opportunity  to  specialize  the  work  and  reduce  the  cost 

of  manufacture.    There  is,  however,  a  limit  beyond  which 

the  further  increase  of  the  size  of  the  unit 

does  not  effect  an  economic  saving,  but  oc- 

eeonomic  .  ,  rjf  .         . 

growth  casions  a  loss.     If  the  expansion  is  per- 

mitted to  go  so  far,  it  cannot  be  sustained 
except  by  imposing  a  tax  upon  the  public,  either  in  the 
form  of  monopolistic  exaction  or  a  subsidy  from  society. 
As  the  economic  unit  increases  in  size,  the  amount  of 
capital  employed  in  it  must  also  increase.    So  long  as  this 
increase  in  size  results  in  more  efficient  pro- 
>rai  obhga-     (jucti0n,  it  is  clearly  in  the  interest  of  society 
beneficial™      that  Jt  should  take  Place>  and  therefore  those 
of  capital.          who  have  surplus  capital  are  under  moral 
obligation  to  allow  the  beneficial  use  of  it  in 
the  public  interest.    The  claim  of  society  upon  the  owner 
of  surplus  capital  for  its  use  in  the  public  interest  is  also 
in  full  accord  with  the  owner's  self-interest.    Practically 
all  capital  requires  constant  renewal,  and  therefore  the 
owner  must  reproduce  it  himself,  permit  others  to  do  it, 
or  lose  it.     If  he  has  wheat  in  excess  of  his  immediate 


64  THE  WAY  OUT 


need,  it  must  be  stored  and  protected  against  rats, 
weevil,  fire,  thieves,  etc.  If  society  assumes  these  risks, 
assures  the  individual  of  its  safe  return,  undertakes  to 
reproduce  the  wheat  and  to  furnish  the  owner  a  supply 
of  new  wheat  each  year  equal  in  quantity  to  the  amount 
loaned,  it  has  clearly  done  him  a  valuable  service. 

illustration  of  Let  us  suppose  A,  B,  and  C  acted  individ- 
the  principle  uajjy  an(j  produced  by  the  time  they  reached 

of  conservation.        .  Qf  Rge  enough  wheat  to  gupply 


their  needs  until  they  are  eighty  years  old,  and  they  de- 
sire to  discontinue  its  production.  Each  stores  his  stock 
of  wheat.  A  knows  nothing  of  the  law  that  requires  the 
constant  renewal  of  production,  or  of  the  risks  incident 
to  its  preservation,  hence  makes  no  provision  against 
these  contingencies.  He  continues  eating  from  his  stock, 
and  finds  in  a  few  years  at  most  that  what  is  left  of  it  is 
no  longer  edible,  or  that  all  has  been  destroyed  or  stolen. 
He  is  reduced  to  the  necessity  of  beginning  again  the  pro- 
duction of  wheat,  or  starving.  His  provision  against 
future  need  was  unwisely  made  and  therefore  proved  a 
failure. 

B  was  more  intelligent.  He  understood  the  law  of  con- 
servation and  the  risks  involved,  so  he  only  kept  so  much 
wheat  as  he  needed  for  the  year's  consumption  and 
loaned  the  rest  to  responsible  parties  with  the  under- 
standing that  they  would  return  him  an  equal  quantity 
of  new  wheat  the  succeeding  year.  Out  of  the  new  wheat 
returned,  he  would  each  year  reserve  his  requirements 
and  loan  the  remainder.  His  stock  was  reduced  each 
year  only  to  the  extent  that  he  consumed  it.  He  had 
wheat  until  he  was  eighty  years  old,  exhausting  the 
supply  at  that  time  just  as  had  been  contemplated  in  the 
original  calculation. 


CAPITALISM  65 


C  was  equally  as  intelligent  as  B,  but  more  selfish. 
He  recognized  that  some  of  his  neighbors  were  under  a 
necessity  to  borrow  wheat  and  he  pursued  the  same 
method  as  B,  except  that  he  took  advantage  of  the  need 
and  exacted  that  they  should  return  him  each  year  new 
wheat  in  equal  quantity  to  what  they  had  borrowed  and 
six  bushels  extra  for  each  hundred  borrowed,  as  pay  for 
the  use  of  the  wheat.  It  developed  that  this  extra  six 
bushels  per  hundred  furnished  enough  for  C's  consump- 
tion, hence  when  he  came  to  die  at  eighty  he  had  as  much 
wheat  as  he  had  when  he  ceased  to  produce  it  fifty  years 
before.  In  other  words,  he  had  lived  for  half  a  century 
upon  the  product  of  his  neighbors'  labor,  not  because  they 
wanted  him  to  have  it,  but  because  they  could  not  help  it. 

If,  then,  the  practice  of  taking  from  the  borrower  in 

excess  of  the  amount  borrowed  is  to  be  justified,  it  must 

be  done  upon  other  than  ethical  grounds.    Its  defenders 

are  reduced  to  the  doubtful  expedient  of  defending  an 

evil  that  should  only  exist  because  it  pre- 

n        • .     i  •  v  •*• 

vents  a  greater  one.    This  plea  necessarily 

lacks  moral  .  .,,    .,  ,      .        ,.      ,.        ,,          ,     .     .   ' 

foundation  carries  with  it  by  implication  the  admission 
that  the  thing  defended  should  be  tolerated 
only  so  long  as  a  better  method  is  not  available.  Capi- 
talism, to  maintain  its  right  to  exist,  is  reduced  to  the 
necessity  of  establishing  its  superior  effectiveness  against 
all  competing  methods,  and  is  by  the  facts  of  the  case  de- 
barred from  appeal  for  support  on  moral  grounds. 

The  owner  of  capital,  in  conforming  to  the  moral  obli- 
gation to  permit  the  use  of  his  surplus,  is  acting  in  accord 
with  enlightened  self-interest.  If  compelled  to  accept  the 
alternative  of  keeping  his  capital  as  A  did,  he  could  better 
afford  to  pay  the  borrower  something  to  take  it  upon  the 
terms  which  B  made.  If  society,  taking  advantage  of 
the  necessities  of  the  owners  of  surplus  capital,  should 
place  them  under  the  same  conditions  that  C  imposed 


66  THE  WAY  OUT 


upon  borrowers,  they,  even  under  such  a  handicap,  would 
still  be  acting  in  accord  with  their  best  interest  to  allow 
the  use  of  this  surplus,  since  renewal  and  the  insurance 
charge  against  risk  might  be  worth  more  than  the  charge 
exacted.  In  fact,  in  practical  life  this  actually  obtains, 
since  owners  of  property  do  pay  insurance  companies  for 
assuming  limited  risks. 

Benefits  result-  The  loan  of  this  surplus  capital  enables  so- 
ing  from  use  cje^y  £0  improve  its  industrial  and  financial 
of  capital.  mechanism  and  makes  possible  increased 
production  at  less  cost,  which  results  in  a  larger  store  of 
wealth  that  enables  all,  the  loaner  included,  to  enjoy  a 
standard  of  living  that  would  otherwise  be  impossible. 
The  advantage  of  the  aggregation  and  use  of  surplus 
capital  over  its  non-use  is  so  obvious  that  it  will  be  gen- 
erally admitted  and  even  the  penalizing  of  its  use,  as  a 
charge  for  capital  certainly  does,  is  not  a  sufficient  deter- 
rent to  overcome  the  advantages.  This  charge  reflected 
in  the  percentage  of  profits,  obtaining  at  any  given  time, 
must  of  necessity  be  something  less  than  the  profits  to  be 
derived  from  the  use  of  capital,  or  the  borrower  must  at 
least  think  so,  as  he  would  not  willingly  incur  a  loss. 
Should  this  occur,  cessation  of  borrowing 
follows  and  the  interest  or  profit  percentage 

rates11  falls  until  the  borrower  again  becomes  con- 

vinced that  the  benefits  of  use  will  be 
greater  than  the  cost  of  it.  In  practice,  then,  the  rule 
seems  to  be  to  put  on  all  the  business  will  bear  and  make 
the  exaction  whatever  the  necessity  of  the  case  will  per- 
mit. The  intelligent  owner,  in  arriving  at  the  maximum 
charge  for  the  use  of  capital,  will  no  doubt  consider,  not 
only  the  amount  than  can  be  momentarily  gotten,  but  the 
effect  that  the  rate  of  return  will  have  upon  future  bus- 


CAPITALISM  67 


iness  and  moderate  the  charge  to  the  extent  that  may  be 
necessary  to  insure  the  continuity  of  business. 

Pay  for  capital   The  case  of  C  illustrates  that  the  pay  ex- 
is  taken  from       acted  f Qr  capital  comes  out  Of  the  product  of 

labor  done  by  others  than  the  loaner.  It 
must  be  remembered  that  the  principle  of  self-interest 
does  not  admit  a  custom  that  continually  calls  upon  one 
to  deliver  to  another,  without  consideration,  a  part  of  his 
product.  If  such  a  custom  obtains,  the  loser  submits  to 

it,  not  because  he  desires  to  do  so  but  be- 

Pay  for  capital  ,  .    .      .,        ___  ... 

an  exaction.  cause  he  cannot  help  it.  The  controlling 
principle  of  self-interest  will  demand  an 
equitable  exchange.  If  the  mind  force  and  the  ne- 
cessity of  the  traders  are  equal,  the  exchange  of  pro- 
ducts between  them  will  take  place  upon  the  basis 
of  equal  value,  therefore  any  transaction  that  gives 
to  one  more  than  his  fair  part,  as  a  general  rule,  will  be 
found  to  rest  upon  either  ignorance  or  necessity.  None 
will  work  for  two  dollars  per  day  when  he  knows  that  his 
labor  is  worth  four  dollars,  unless  he  is  unable  to  help 
himself.  The  excess  taken  inethically  either  as  an  in- 
terest or  profit  charge,  will  usually  when  analyzed  be 
found  to  consist  of  over-charge  for  labor,  superintend- 
ence, interest  or  excessive  insurance.  If  A  and  B  ex- 
^dv  change  products  upon  equal  terms,  neither 

in  exchange.      *s  ^e  richer,  expressed  in  value,  for  having 
traded.    The  advantage  to  both  is  in  having 
by  exchange  the  use  of  two  different  products,  whereas 
without  the  exchange  each  could  have  only  one.     If  A 
trades  his  product  to  B,  receiving  more  in  return  than  he 
gives,  he  becomes  richer  and  B  poorer  to  the  extent  of 
the  difference.    It  is  often  claimed  that  the  owner  should 
Deceive  a  consideration  for  loaning  his  surplus  to  another 
because  of  the  deprivation  he  undergoes.    If  he  can  use 


68  THE  WAY  OUT 


it  advantageously  himself  there  appears  to  be  no  valid 
reason  why  he  should  loan  it  at  all.  If  there  is  only  one 
tool  why  should  the  owner  deprive  himself  of  the  instru- 
ment unless  the  borrower  can  use  it  more  efficiently?  In 
such  a  case  the  owner  becomes  free  to  engage  in  some 
other  employment  in  which  he  may  be  more  proficient. 
Society  would  be  benefited,  and  each  of  the  parties  would 
be  better  off  because  of  the  transaction.  If  the  borrower 
of  the  tool  returned  it  in  a  condition  comparable  to  that 
which  existed  when  he  borrowed  it,  there  would  seem  to 
be  no  ground  for  claim  for  pay  for  its  use.  If,  then,  the 
mutual  and  social  benefits  arising  from  a  better  use  of 
the  tool,  which  the  owner  himself  could  use,  justify  the 
loaning  of  the  same  without  charge,  what  is  to  be  said  of 
that  which  the  owner  cannot  use  at  all?  In  such  case  the 
owner  has  a  surplus  that  he  cannot  employ 
Lender  and  an(j  jg  (jepen(jen^  Up0n  others  to  preserve  it 

borrower  .  .  .  , ,  ,          ,.      . 

mutually  against  time,  accident,  and  spoliation,  and 

benefited.          ^  he  can  loan  it  safely  he  receives  a  benefi- 
cial service.     He  confers  no  more  than  he 
receives,  hence  has  no  ethical  ground  for  a  claim  for  extra 
remuneration. 

insurance          The  creation  of  facilities  for  larger  and 
charge  more  economical  production,  and  the  pro- 

vision of  the  means  of  easier  transportation 
and  transmission  are  all  dependent  upon  the  existence 
and  use  of  surplus  capital.  If  such  things  are  in  accord 
with  utility,  the  capital  expended  is  more  than  repaid  in 
the  greater  production  and  better  distribution  they  su- 
perinduce. If  these  things  are  done  under  private  initia- 
tive, the  entrepreneurs  as  well  as  the  owners  of  the  cap- 
ital must  take  the  risk  of  the  utility  or  non-utility  of  the 
work  and  they  of  necessity  must  take  account  of  the 
probable  risk  involved  and  make  the  rate  for  the  use  of 


CAPITALISM  69 


capital  higher  to  cover  this  risk.  If  the  risk  is  under- 
estimated, the  entrepreneur  loses  until  his  margin  is  ex- 
hausted and  the  owner  of  the  capital  loses  the  rest.  If 
the  work  is  one  of  utility,  the  charge  for  insurance"  is 
eventually  transferred  to  society  in  the  form  of  charges 
for  services.  If  this  insurance  charge  is  correctly  laid 
it  will  only  cover  losses  and  therefore  yield  no  net  return 
on  capital.  If  capital  is  entitled,  as  is  conceded,  to  be 
protected  against  loss,  it  follows  that  sound  ethics  re- 
quires that  the  charge  be  reduced  when  it  becomes  appar- 
ent to  the  lender  that  it  is  in  excess  of  that  necessary  to 
cover  losses.  This  insurance  fund  is  not  the  property  of 
the  owner  of  the  capital.  It  is  a  contribution  from  society 
to  guarantee  the  safety  of  the  individual's  loan.  The 
ground  upon  which  this  insurance  charge 
rests  is  that  society,  or  such  members  of  so- 

assume  the  .    .  ,  . ,    ,  ., 

risk  ciety  as  possess  surplus  capital,  are  under  a 

moral  obligation  to  furnish  it  for  beneficial 
use,  and  society  as  a  whole  is  under  obligation  to  furnish 
such  organization  as  may  be  necessary  to  insure  the  ag- 
gregation and  safety  of  capital.  In  such  case,  if  it  is  used 
in  a  non-utilitarian  way  either  by  design  or  on  account 
of  defective  judgment  the  result  is  a  loss  that  society 
must  bear.  If  society  makes  no  such  provision  and  the 
individual  must  on  his  own  initiative  undertake  to  do  for 
society  that  which  it  should  have  done  for  itself,  it  must 
submit  to  such  losses  as  are  incident  to  its  own  failure  to 
protect  itself. 

No  moral  This,  however,  does  not  mean  that  the  indi- 

vidual has  the  moral  right  to  exploit  society. 
He  may  and  should  provide  a  safety  fund, 
charging  profit  for  the  purpose.    He,  in  the  event  of  the 
failure  of  society  to  provide  the  capital  necessary  to  in- 
sure beneficial  development,  may  tax  them  in  the  form  of 


70  THE  WAY  OUT 


profit  to  amass  a  fund  to  pay  hire  on  capital  or  aggregate 
the  capital  itself  by  a  profit  charge,  but  thus  compelling 
society  to  do  its  duty  to  aggregate  capital  by  no  means 
transfers  to  him  the  title  to  such  capital.  There  is  no 
legitimate  way  by  which  one  can  acquire  title  to  that 
which  belongs  to  another  other  than  by  voluntary  gift  or 
exchange  of  equal  value  for  it.  This  forcible  method  of 
gathering  capital,  justified  by  the  failure  or 

Trust  relation.       '  ,    °       ^        '^     ,     .,      /,  « 

refusal  of  society  to  do  its  duty,  confers  no 
title  but  creates  a  trust  relation  between  the  gatherer  of 
the  capital  and  the  public  from  whom  he  has  taken  it. 
The  omission  to  consider  the  trust  character  of  this  ac- 
cumulation leads  to  many  unfortunate  results. 

In  times  of  commercial  prosperity  when  the  insurance 
fund  grows  rapidly,  many  appropriate  it  and  raise  the 
standard  of  living.  Commercial  depression  follows,  and 
having  consumed  or  greatly  impaired  the  protective 
fund,  they  become  wrecked.  It  may  be  said,  too,  that  so 
long  as  capital  is  employed  in  the  production  of  wealth, 
the  mere  claim  of  ownership  does  not  materially  injure 
society  except  in  so  far  as  the  possession  of  this  trust 
fund  may  give  opportunity  for  the  abuse  of  it.  The  most 
Wa  serious  danger  lies  in  the  temptation  which 

harmful  suc^  Possession  offers  to  the  trustee  to  be- 

come wasteful  or  to  abuse  the  power  which 
the  control  of  great  wealth  confers.    If  the  trusteeship 
can  be  justified  upon  the  grounds  of  society's  insufficiency 
it  must  be  remembered  that  the  trustee's 

Trustee's  obli-     ward  ^^  foe  ^  ^^  Qf  Mg  unfailing 
gationtohis  TT    .  i          j       ,1        IT      ,• 

ward  care.    He  is  not  only  under  the  obligation  to 

conserve  and  use  wisely  the  trust  estate,  but 
is  likewise  under  the  most  sacred  and  imperative  duty  to 
employ  every  available  means  to  restore  the  ward  to  nor- 
mality so  that  he  can  assume  full  possession  and  manage- 
ment of  his  own  estate. 


CAPITALISM  71 


Abuse  of  the      The  insurance  fund  is  an  essential  feature 
insurance          Of  capitalism,  and  by  its  abuse  the  most  of 

the  unwarranted  accumulations  of  wealth 
are  accomplished.  In  actual  practice,  capital,  when  the 
insurance  feature  is  eliminated,  receives  a  very  small 
return.  Note  the  low  rate  when  the  security  is  con- 
sidered safe.  The  safer  the  bond  the  lower  the  interest 
.  rate  is  the  rule,  which  leads  to  the  conclu- 

charge'  s^on  ^a^  ^  the  safety  of  the  investment 

were  absolute  there  would  and  should  be  no 
return.  In  such  case,  the  owner  of  the  capital  would 
always  have  at  his  command  all  the  surplus  he  had  saved 
without  risk  of  diminution  except  to  the  extent  that  he 
himself  consumed  it.  Under  this  condition  the  producer 
of  wealth  could  enjoy  his  savings  so  long  as  they  lasted, 
but  would  be  debarred  from  converting  himself  into  a 
vampire  to  suck  the  life-blood  of  society. 

If  the  social  use  of  capital  upon  which  improvement  in 
production  and  transportation  depends  could  be  pre- 
served under  a  system  that  aggregated  free  capital  it 

would  tend  to  increase  the  fund  of  surplus 
Just  distnbu-  capital,  since  it  is  a  well  known  weakness  of 

man  to  become  more  careless  and  extrava- 

duces  economy  .  . 

in  expendi-        £ant  m  expenditure  as  he  is  able  to  make  it 
ture.  °ut  of  the  labors  of  others.     "Easy  come, 

easy  go,"  is  proverbial,  therefore,  if  one's 
expenditures  are  confined  to  his  own  productions,  greater 
conformity  to  the  law  of  utility  follows,  and  under  the 
latter  circumstances  we  should  have  fewer  of  those  twin 
evils  of  society  among  us,  the  wastef  ully  rich  and  the  mis- 
erably poor.  The  insurance  or  profit  and 
loss  account  when  Pr°perly  adjusted  will 
balance.  balance.  If  extra  profits  are  set  aside  to 

cover  losses  it  is  manifest  that  when  the 
losses  are  paid  there  should  be  nothing  left.  It  is,  of 


72  THE  WAY  OUT 


course,  understood  that  no  reference  is  here  made  to  such 
proper  percentage  as  the  banker  or  broker  may  charge  to 
cover  wages  and  actual  service,  that  being  an  entirely 
permissible  administrative  expense. 

All  charges  made  by  the  commercial  classes  may  be 
said  to  be  composed  of  wages,  insurance,  and  a  trust 
fund  out  of  which  the  hire  of  capital  is  paid  and  a  surplus 
created  to  furnish  the  necessary  capital  to  provide  for  the 
expansion  and  growth  of  the  business.  When  a  business 
accumulates  capital  rapidly  it  is  usually  due  to  an  exces- 
sive insurance  charge.  It  is  then  said  to  be  a  profitable 
business.  If,  on  the  other  hand,  it  loses  capital,  it  is  proof 
that  the  insurance  charge  is  too  small  and  it  is  then  said 
to  be  unprofitable.  The  system  of  capitalism,  as  has 
already  been  explained,  rests  upon  profit.  That  is  to  say, 
it  must  offer  a  reward  for  the  aggregation  of  capital  in 
the  form  of  a  return  for  its  use  and  it  must  make  the  in- 
surance charge  too  high  in  order  that  it  may  yield  a  suf- 
ficient amount  in  excess  of  cost,  in  other  words,  a  surplus 
fund  to  provide  the  necessary  capital  to  take  care  of  the 
growth  of  the  enterprise.  The  excess  charges  must  of 
necessity  be  collected  under  duress.  Among  others,  the 
devices  employed  to  effect  the  desired  results  may  be  men- 
tioned the  following :  first,  the  employment  of  workers  at 
less  than  the  correct  wage ;  second,  the  sale  of  the  finished 
product  at  a  higher  price  than  would  obtain  if  the  system 
of  distribution  were  ethical.  In  such  case,  the  excess 
above  the  proper  charge  is  collected  on  account  of  either 
the  ignorance  or  the  necessitous  circumstances  of  the 
buyer  or  perhaps  both. 

The  story  of  Dick  Whittington's  cat  is  familiar.  It  has 
come  down  to  us  as  an  example  of  what  Dame  Fortune 
may  do  for  us.  Parenthetically  it  may  be  observed  that 
Dame  Fortune  is  the  patron  goddess  of  robbers.  The 
morals  of  the  story  do  not  commend  it,  and  it  doubtless 


CAPITALISM  73 


would  have  been  buried  in  oblivion  years  ago  if  it  had 
not  been  a  faithful  reflex  of  human  nature  in  its  unde- 
veloped state. 

Wealth  is  It  is  difficult  for  the  ordinary  mind  to  con- 
power,  ceive  of  greatness  divorced  from  material 
things,  hence  the  possession  of  great  wealth  is  to  many 
conclusive  proof  of  the  possessor's  prowess.  It  matters 
not  so  much  that  he  may  have  disregarded 

Man's  worship  , .  .     ,  •••/•• 

of  the  material  every  ethical  consideration  in  the  acquisi- 
tion of  this  wealth,  the  material  exponent  is 
alone  sufficient  to  satisfy  the  many.  As  proof  that  this 
exponent  is  the  guiding  star  it  may  be  observed  that  when 
one  unfavorable  circumstance  deprives  the  rich  man  of 
his  riches  he  falls  at  once  to  the  common  level.  Dick 
Whittington,  the  errand  boy,  sleeping  in  the  garret,  re- 
ceiving the  cuffs  of  the  empress  of  the  kitchen,  was  a 
person  of  no  particular  importance,  but  the  Hon.  Richard 
Whittington,  Lord  Mayor  of  London  by  virtue  of  an  act 
of  robbery  perpetrated  against  an  African  savage,  was 
a  personage  to  whom  the  common  herd  was  proud  to 
render  homage.  Dick  Whittington  still  lives  and  may  be 
seen  in  miniature  in  every  mart.  He  left  an  enduring 
memorial  as  evidence  of  his  possession  of  a  keen  appre- 
ciation of  the  appropriate  in  the  form  of  Newgate  prison, 
which  he  built  for  the  accommodation  and  delectation  of 
those,  who  like  himself,  would  become  the  beneficiaries  of 
the  system  that  undertakes  to  get  something  for  nothing. 
His  principle  is  subscribed  to  and  his  method  practiced  by 
almost  every  one  from  the  gold  brick  vender  to  the  mer- 
chant prince.  The  merchant's  private  cost  mark,  the  air 
of  secrecy  and  so-called  privacy  that  pervades  the  busi- 
ness atmosphere  come  from  the  desire  to  withhold 
knowledge  that  would  enable  the  public  to  arrive  at  a 
correct  idea  of  a  fair  ratio  of  exchange.  The  advance 


74  THE  WAY  OUT 


agent  of  a  superior  civilization  who  buys  the  land  of  the 
ignorant  savage  for  a  few  trinkets  feels  the  same  satis- 
faction that  falls  to  the  share  of  the  exploiter  who,  giving 
a  trifle  in  return,  takes  oil  wells  and  coal  mines  from  an 
ignorant  populace.  The  wily  horse  trader  who  exchanges 
the  broken  down,  worthless  animal  for  one  that  is  sound 
of  limb,  is  considered  disreputable.  If  he  applies  the 
same  principles  and  cheats  the  community  out  of  a  val- 
uable franchise  which  he  operates,  and  enriches  himself 
out  of  all  proportion  to  the  services  rendered,  he  becomes 
a  worthy  example  to  all  the  budding  Dick  Whittingtons 
of  the  neighborhood. 

The  fool  and  Even  the  Almighty  can  do  nothing  for  the 
his  folly.  f00]  except  to  give  him  over  to  his  folly. 

When  the  Israelites  cried  for  a  king,  He  told  them  the 
consequences,  but  it  did  not  deter  them  from  making  the 
experiment.  Little  can  be  done  to  mitigate  the  effects  of 
evil  causes.  They  will  likely  remain  to  serve  as  cruel  mas- 
ters in  the  school  of  bitter  experience,  the  institution  re- 
served for  the  instruction  of  that  large  class  that  will 
learn  in  no  other.  The  remedy  lies,  not  so  much  in  help- 
ing them  to  avoid  penalties,  as  in  the  dissipation  of  their 
ignorance. 

The  development  of  mind  force  by  practical  education 
is  the  panacea  for  such  ills.  Along  with  increased  intel- 
ligence goes  the  public  conscience,  which  will  enforce  only 
so  much  of  the  moral  law  as  the  common  intelligence  has 
perceived.  If  both  parties  to  the  exchange  are  ignorant 
there  is  no  moral  responsibility.  If  A  knows  B's  product 
to  be  double  the  value  of  his  own,  and  exchanges  one  for 
the  other,  B's  consent  is  based  upon  a  lack  of  knowledge 
Moral  res  on  w^c^  enables  A  to  get  one-half  of  B's  pro- 
sibility  "  duct  ^or  nothing.  The  question  of  morality 

hinges  upon  A's  motive.     If  he  intends  to 


CAPITALISM  75 


take  advantage  of  B's  ignorance,  he  is  quite  as  immoral 
as  he  would  be  were  he  to  take  the  same  amount  while 

B  slept.  The  purpose  underlying  the  use  of 
purpose  one's  force  should  be  honest  service  so  that 

the  world's  work  might  be  done  in  such  an 
effective  manner  as  to  insure  that  the  laborer  would  re- 
ceive his  fair  reward,  and  that  the  general  good  would  be 
advanced.  In  such  conception  of  duty  there  is  no  trace 
of  desire  to  gather  where  one  has  not  sown  nor  wish  to 
over-reach  a  neighbor.  The  controlling  motive  in  this 
case  would  be  to  do  unto  others  as  we  would  have  them  do 
unto  us. 

Forceful  It  is  a  reprehensible  practice  to  employ  force 

exactions          £0  compel  one  to  make  exchanges  at  an  un- 

robbery.  jugt  ratia      jf  A  meetg  g  Qn  the  highway 

and  under  threat  of  harm  forces  him  to  exchange  a  horse 
worth  fifty  dollars  for  a  cow  worth  twenty-five  dollars, 
the  law  comes  to  B's  rescue  and  holds  A  guilty  of  robbery. 
B  may  have  been  willing  to  exchange  his  horse  for  the 
cow,  provided  he  received  other  things  sufficient  in  value 
to  equal  the  difference.  A  has  bread  and  B  has  other 
products  and  must  have  bread.  A  has  a  monopoly  of 
bread  and  will  not  exchange  with  B  except  upon  the  ratio 
of  double  value  of  bread.  B  knows  that  A's  price  is  ex- 
tortionate but  he  must  have  the  article,  makes  the  ex- 
change and  receives  only  one-half  of  the  value  of  his  own 
products  in  bread.  What  difference  is  there  either  in  the 
principle  or  in  the  practical  results  of  the  two  trans- 
actions? In  both  cases  the  necessitous  were  compelled  to 
surrender  one-half  of  their  values  for  which  they  received 
nothing  in  return.  It  is  self-evident  that  the  employment 
of  any  force  with  the  motive  of  getting  the  product  of 
another  for  less  than  its  full  value  is  robbery.  It  does 
not  alter  the  morals  of  the  case  if  this  is  done  by  taking 


76  THE  WAY  OUT 


advantage  of  a  defective  economic  system,  by  monopolis- 
tic privileges  conferred  by  a  government,  or  by  the  enact- 
ment of  protective  laws  that  enable  the  robber  to  ply  his 
trade  with  more  success. 

Saving  by  It  is  claimed  that  the  saving  of  capital  is  the 
self-denial.  result  of  self-denial.  In  some  cases  this 
may  be  true.  It  is  nearer  the  truth,  however,  to  say  that 
much  of  the  surplus  capital  devoted  to  productive  pur- 
poses is,  in  the  present  state  of  social  development,  the 
result  of  enforced  abstinence.  It  is  not  intended  to  say 
that  this  involuntary  contribution  to  surplus  capital  is 
the  only  means  by  which  the  results  desired  can  be  accom- 
plished, nor  is  it  even  insisted  that  this  method  of  ac- 
cumulation is  desirable.  The  fact  that  it  is  done  does  not 
necessarily  prove  that  the  same  result  could  not  be 
reached  by  a  process  that  would  be  more  in  accord  with 
ethical  considerations  and  individual  rights. 

Carnegie  on  It  has  been  contended,  notably  by  Andrew 
trusteeship.  Carnegie,  that  it  is  productive  of  greater 
good  to  take  the  surplus  wealth  of  the  people  in  the  form 
of  profits,  vesting  the  ownership  or  trustee  management 
in  the  hands  of  the  few  than  to  leave  it  in  the  hands  of 
its  rightful  owners.  This  assumption  must  necessarily 
be  predicated  upon  the  incompetency  of  the  social  body  to 
develop  proper  organization  under  which  its  functions 
would  be  efficiently  performed.  In  other  words,  this 
theory  claims  that  it  would  be  better  in  the  public  in- 
terest to  take  away  from  the  individuals  a  part  of  what 
belonged  to  them  and  use  it  reproductively,  justifying 
the  course  by  assuming  that  the  rightful  owners  lack  ca- 
pacity to  devote  it  to  beneficial  use.  It  may  be  that  man- 
ufacture, transportation,  and  distribution  have  advanced 
more  rapidly  under  the  system  of  spoliation  with  its  dis- 


CAPITALISM  77 


regard  of  ethical  considerations  than  would  have  been  the 
case  had  a  more  just  system  prevailed,  but  even  if  this  is 
admitted,  it  does  not  follow  that  the  present  system  is  jus- 
tified or  even  justifiable.  Even  if  slower  as  regards  these 
things,  it  is  conceivable  that  the  progress  of  civilization 
might  have  been  better  balanced  and  might  have  made 
a  greater  average  advance  if  the  entire  economic  system 
had  been  brought  into  closer  conformity  to  moral  law. 

It  is  exceedingly  doubtful  if  the  overlordship  of  the  few 
has  ever  resulted  in  giving  benefits  that  would  compen- 
sate for  the  deterioration  which  follows  in  the  subject  of 
its  spoliations.    No  amount  of  creature  com- 

Individual  „  .,,  *       ^       ^  * 

independence  torts  will  ever  compensate  for  the  loss  of 
those  virile  qualities  of  manhood  which  are 
strengthened  and  developed  by  the  knowledge  of  the  fact 
that  the  laborer  can  feel  assured  that  he  will  receive  the 
full  measure  of  the  reward  of  his  efforts,  and  that  he,  as 
an  essential  factor  in  the  government  and  direction  of  the 
world's  work,  must  rely  upon  himself  for  the  accomplish- 
ment of  social  progress.  The  latter  method  would  de- 
velop men,  the  former,  slaves. 

Willingness  The  willingness  of  the  producer  to  forego 
to  save.  present  expenditure  that  he  may  have  the 

use  of  his  production  at  some  future  time,  rests  upon 
grounds  as  multifarious  as  the  ambitions  and  purposes  of 
the  individual  members  of  the  human  family.  One  is 
born  a  miser,  he  saves  merely  for  the  satisfaction  and 
gratification  of  possessing  the  savings  without  much  re- 
gard to  their  use.  He  will  go  in  rags,  half  starve  and 
even  beg  that  he  may  acquire  something  to  put  in  store. 
Another  saves  because  he  fears  the  depend- 

Reasonfor  .    .        ...        ,,     ,  /  . 

saving  enc^  an(^  deprivation  that  poverty  brings 

and   he   willingly   denies   himself   present 

pleasures  that  he  may  avoid  future  pain.    Another  saves 


78  THE  WAY  OUT 


because  observation  has  taught  him  that  the  results  of 
prudence  and  foresight  which  prompt  the  accumulation 
of  a  sufficient  surplus  during  man's  productive  period  to 
provide  against  the  wants  that  necessarily  come  in  his 
non-productive  period,  are  altogether  good.  Another 
saves  that  he  may  provide  funds  to  rear  a  family,  giving 
its  members  such  opportunity  for  education  and  develop- 
ment as  may  be  necessary  to  equip  them  for  useful  citi- 
zenship. Others  still  of  a  more  altruistic  disposition  will 
work  and  save  in  order  to  create  a  reserve  that  will  en- 
able them  to  put  it  to  beneficial  use  in  doing  things  for 
social  benefit,  the  importance  of  which  is  not  sufficiently 
appreciated  by  society  to  induce  it  either  to  arrange  for 
the  work  or  pay  for  it  when  it  is  done.  Others  desire  to 
accumulate  in  order  to  acquire  the  power  which  wealth 
brings  and  find  a  sufficient  compensation  for  their  efforts 
in  this  direction  in  the  exercise  of  the  influence  that  the 
rich  have  over  the  poor. 

The  controlling  motives  for  saving  are  by  no  means  the 
same  in  different  individuals  nor  of  equal  merit,  some 
being  worthy  and  others  despicable.  It  does  not  appear 
unreasonable  that  the  desire  for  ownership  of  the  saving 
itself,  even  if  it  could  not  be  hired  out,  is  sufficient  to  fur- 
nish incentive  to  develop  normally  the  saving  impulse.  It 
is  beyond  question  that  security  in  the  possession  of  the 
laborer's  product  is  an  indispensible  element  in  the  pro- 
motion of  both  production  and  saving.  It  is 

a  e  y  an          plainly  for  this  reason  that  a  country  with  a 
justice  pro-          r       .  *  .  •        •      ,- 

mote  saving.       stable,  orderly  government  insuring  justice 

to  its  citizens  will  develop  a  national  wealth 
out  of  all  proportion  to  one  which  does  not  afford  such 
protection  to  its  citizens.  It  may  be  said,  too,  in  this  con- 


CAPITALISM  79 


nection,  that  the  return  of  interest  paid  on 
capital  is  lowest  in  the  well  governed  coun- 

mterest  the  .  .  „  c 

measure  of  so-  tr^  and  hlghest  m  the  badly  governed.  It 
cial  progress.  may  be  said  further  that  the  return  on  capi- 
tal rises  as  civilization  falls.  There  is  no 
more  certain  index  of  the  rise  or  fall  of  social  progress 
than  the  interest  returned  or  percentage  of  profit  that 
obtains  at  any  given  time.  God  save  the  country  in  which 
Shylock  prospers  most. 

If  the  hire  of  capital  is  a  legitimate  earning  inuring  to 
the  owner  of  it,  it  could  only  add  an  additional  incentive 
to  save  to  the  extent  of  the  income  from  this  source  and 
therefore  could  not  by  any  stretch  of  the  imagination  be 
said  to  furnish  a  larger  consideration  to  save.  It  would 
indeed  be  a  foolish  possessor  who  would  not  forego  the  in- 
terest to  save  the  principal.  If,  however,  this  return  on 
capital,  this  additional  incentive  to  save,  is 
Return  on  noj.  a  pr0per  charge  but  is  an  unjustifiable 
capital  stimu-  exaction  the  effect  must  of  necessity  be  de- 
lates the  few,  . ,  «  ,  ,  .  ,  n 
depresses  the  cidedly  detrimental  to  the  moral  as  well  as 

many.  the  material  development  of  society.     In 

this  case  it  would  be  an  involuntary  contri- 
bution from  those  who  had  earned  to  those  who  had  not, 
and  since  the  beneficiaries  are  in  smaller  numbers  than 
those  suffering  the  deprivation,  the  stimulus  given  to  the 
former  would  in  no  measure  compensate  for  the  depriva- 
tion experienced  by  the  latter,  therefore  a  net  loss  would 
result.  It  is  conceded  that  the  existence  of  an  organiza- 
tion for  the  purpose  of  aggregating  the  surplus  savings 
of  a  country,  even  though  this  organization  be  inethical 
in  its  operation,  is  productive  of  far  greater  social  benefit 
than  could  be  realized  if  no  organization  for  this  purpose 


80  THE  WAY  OUT 


existed.  If  each  individual  were  left  to  take 
Capitalistic  care  of  hig  Qwn  savings  and  to  subject  them 

cooperation  ,      ,         &*.*'?•          *•  11 

better  than  to  use>  "^  benefits  of  cooperation  could  not 
none,  be  obtained.  The  development  of  the  capi- 

talist system  came,  then,  as  the  only  prac- 
ticable method  available  at  that  time  by  which  coopera- 
tive action  could  be  secured.  With  all  its  faults  and  short- 
comings it  was  better  than  that  which  existed  before  it 
came  into  existence  and  it  will  likely  be  retained  until  the 
public  mind  conceives  a  still  more  efficient  system. 

Saving  an  Under  any  system  the  individual,  so  long  as 
mstmct.  he  feels  a  reasonable  assurance  that  he  will 

be  protected  in  the  possession  and  use  of  his  product,  will 
strive  to  create  a  surplus  because  the  desire  to  provide 
against  future  need  is  a  natural  instinct  developed  under 
the  particular  necessity  of  one's  environment,  and  it  will 
assert  itself  even  if  there  is  no  inducement  other  than 
that  which  the  saving  itself  offers.  Man  cultivates  his 
crops,  reaps  and  stores  them  in  due  season  for  consump- 
tion during  the  periods  of  non-production  even  though  he 
is  assured  that  no  premium  other  than  the  use  of  the  pro- 
ducts themselves  will  be  given  him.  The  knowledge  of 
the  necessity  of  saving  is  the  main  reason  for  its  practice. 

The  more  intelligent  the  people,  the  greater 
Intelligence  wjjj  be  the  g  to  pro(juce  an(j  gave  hence 


increases  «     .,          ,  ,        .         ,,      , 

saving  we  ^n(^  the  l°west  production,  the  least  con- 

sumption, and  the  greatest  poverty  in  ignor- 
ant communities,  and  the  largest  production,  the  most 
liberal  consumption  and  greatest  amount  of  savings  in 
the  countries  having  the  highest  moral  and  intellectual 
development. 


CAPITALISM  81 


Capitalism  en-  Capitalism,  then,  as  a  social  instrument, 
titled  to  live  wju  j^  entitled  to  live  only  so  long  as  it  may 
until  a  better  demonstrate  its  superiority  over  any  other 

instrument  is  .,   ,  ,  .      ,     *»  '  ,.  ,  .        r,        , 

found  available  method  of  accomplishing  the  de- 

sired results.  If  a  better  system  is  found, 
which  will  aggregate  capital  at  less  expense  and  effect  a 
more  beneficial  use  of  it,  eliminating  the  opportunity  of 
the  exploiter  to  transfer  to  himself  the  property  of  others 
without  giving  a  fair  return  for  it,  it  will  displace  cap- 
italism, just  as  the  less  efficient  methods  of  transporta- 
tion have  disappeared  before  those  of  greater  efficiency. 
Capitalism,  and  private  monopoly  that  necessarily  re- 
sults from  the  development  of  the  principle,  have  made 
themselves  tolerable  on  account  of  their  ability  to  effect 
economic  savings  and  to  promote  increased  production 
through  the  introduction  of  improved  machinery.  It  has 
been  able  to  take  its  toll,  and  out  of  the  increased  produc- 
tion leave  the  portion  of  labor  larger  than  it  could  have 
been  had  these  improvements  not  taken  place.  The 
efforts  of  large  corporations  to  encourage 
more  efficient  production  have  been  produc- 


^  highly  beneficial  results.     It  fur- 
nishes a  splendid  example  of  an  intelligent 
selfishness  that  seeks  to  serve  itself  by  serving  others. 
Admitting  its  many  good  points  and  the  permanent  bene- 
fits that  capitalism  has  made  available  to  society,  the  con- 
viction still  remains  that  its  fundamental  principle  does 
not  square  with  the  moral  law  and  that  its  incentives  do 
not  lead  to  the  development  of  moral  character.    Lacking 
the  moral  foundation  upon  which  all  permanent  institu- 
tions must  depend  for  continuity  of  life,  it 

Capitalism  11  t    -i 

,  *         .        can  only  be  regarded  as  a  passing  stage  in 

lacks  moral  J  Jj. 

foundation        human  progress  that  will  disappear  as  the 
perceptions  of  man  grow  clearer  and  the  ne- 
cessity for  closer  conformity  to  ethical  consideration  and 
principle  become  more  urgent. 


82  THE  WAY  OUT 


Capitalism  pays  hire  for  the  use  of  capital  and  its  pro- 
tagonists claim  that  this  practice  not  only  aggregates  the 
surplus  but  offers  an  incentive  for  increased  production 
and  saving.  As  already  explained,  the  capital  that  is 
saved  and  gathered  to  be  used  to  produce  new  capital, 
that  is  to  say,  used  productively,  must  of  necessity  be  con- 
sumed in  the  process  of  reproduction  just  as  the  wheat 
that  is  sown  must  germinate  and  become  consumed  in  the 
process  of  making  new  wheat.  The  expenses  of  the  op- 
eration, the  hire  of  capital  and  the  labor  must  come  out 
of  the  new  production.  If  the  new  production  yields  less 
than  the  sum  of  these  charges,  to  the  extent  of  this  differ- 
ence the  entrepreneur  will  have  as  his  share  when  the 
new  crop  is  garnered  less  capital  than  he  had  at  the  start. 
If  he  borrows  all  the  capital  used  he  will  be  unable  to  pay 
all  of  the  debt  he  contracts.  In  other  words,  he  will  be 
insolvent.  If  the  operation  is  successful  and  yields  a  sum 
in  excess  of  the  original  capital  used,  the  amount  paid  for 
its  hire  and  its  labor  expense,  the  entrepreneur  will  be 
the  gainer  to  the  extent  of  the  amount  of  this  excess. 
Hence,  it  is  the  borrower  who  takes  the  pri- 

Borrower  takes  .  1      „ ,         •    ml        -1^,11 

primary  risk  mary  risk  of  loss.  The  risk  of  the  loaner  is 
secondary  in  that  he  only  sustains  a  loss 
after  the  ability  of  the  borrower  to  pay  it  has  been  ex- 
hausted. If  in  addition  to  the  amount  necessary  to  insure 
the  entrepreneur  against  loss,  he  must  include  a  charge 
for  the  use  of  capital,  this  can  only  be  secured  out  of  the 
sum  produced,  hence  the  remainder  left  for  division 
among  the  workers  will  be  smaller  to  that  extent  and  the 
share  of  each  will  accordingly  be  reduced.  If,  then,  in- 
creased return  is  an  inducement  to  greater  production 
and  saving,  it  is  manifest  that  the  workers  will  be  dis- 
couraged to  the  extent  that  the  hire  of  capital  reduces 
their  portions.  What  advantage  can  accrue  from  acceler- 
ating the  one  class  and  depressing  the  other?  This  as- 


CAPITALISM  83 


sumes  that  the  classes  are  numerically  equal,  which  is  far 
from  being  the  case.  The  more  correct  assumption  is 
that  the  few  receive  the  benefits  while  the  many  must  pay 
the  losses.  The  return  on  capital,  then,  on  the  principle 
relied  upon  by  its  advocates,  acts  on  the  average  as  a 
deterrent  rather  than  an  excitant  both  upon  the  produc- 
tion and  saving  of  capital. 

If  it  is  contended  that  the  workers  paying  the  charge 
for  the  use  of  capital  are  also  owners  of  the  capital 
loaned,  therefore  the  beneficiaries  of  the  charge,  it  may 
be  replied  that  since  this  charge  must  come  out  of  produc- 
tion if  the  workers  are  not  to  lose  by  it,  the  amount  re- 
ceived must  equal  the  amount  they  pay,  in  which  case  no 
benefit  would  accrue.  If,  however,  they  receive  three  per 
cent  on  their  savings  and  they  must  pay  six  per  cent  for 
their  use  in  productive  employment,  it  is  manifest  that 
the  practical  effect  under  the  principle  of  the  defenders  of 
capitalism  is  that  the  workers  are  always  on  the  losing 
side  of  the  proposition.  It  is,  of  course,  plain  that  the 
charge  for  the  use  of  capital  and  whatever  profit  may 
accrue  from  an  excess  insurance  charge  are  both  included 
in  the  price  of  the  product  to  the  ultimate  consumer,  who 
cannot  shift  them. 

If  the  practice  of  paying  a  charge  for  the  use  of  capital 
is  the  only  way  of  securing  its  aggregation  and  beneficial 
use,  it  is  no  doubt  far  better  for  society  to  permit  this 
practice  than  to  be  deprived  of  such  advantages;  but  is 
society  under  the  necessity  of  accepting  either  of  these 
alternatives?  No  one  can  deny  that  the  saving  and  effi- 
cient use  of  surplus  capital  make  it  possible  greatly  to 
increase  production  and  bring  into  existence  many  desir- 
able and  helpful  things  that  could  not  otherwise  be  ob- 
tained, but  these  social  benefits  accrue  to  all,  to  the  pos- 
sessor as  well  as  to  the  non-possessor  of  loanable  surplus. 
The  creation  of  these  general  benefits,  altogether  desira- 


84  THE  WAY  OUT 


ble  in  themselves,  by  no  means  justifies  an  unethical  prac- 
tice that  can  be  abolished.  It  is  the  moral  duty  of  each 
individual  member  of  society  who  is  physically  and  men- 
tally qualified  to  work  efficiently  to  conserve  this  surplus 
by  permitting  it  to  be  used,  and  society  has  the  right  and 
the  power  when  properly  organized  to  compel  him,  if  nec- 
essary, to  do  so.  It  does  so  now,  but  generally  confines 
the  application  of  the  principle  to  extreme  cases,  usually 
for  destructive  purposes  such  as  war.  It  is  a  sad  com- 
mentary upon  the  world's  so-called  civilization  that  so- 
ciety will  go  to  any  extreme  to  destroy  itself  but  will 
utterly  refuse  to  adopt  even  the  plainest  and  most  reason- 
able methods  of  insuring  its  happiness  and  permanent 
welfare.  It  will  tear  down  and  destroy  with  reckless 
abandon  but  will  only  build  up  and  construct  under  the 
lash  of  relentless  necessity. 

If,  then,  the  entire  surplus  production  can  be  comman- 
deered by  society  to  harm  itself,  it  could,  if  it  would, 
exercise  the  same  power  to  promote  its  welfare.  That  it 
has  not  done  so,  that  it  would  not  have  done  so  in  the  past, 
is  beyond  question,  but  the  fact  that  it  might  have  done 
so  or  will  be  able  to  do  so  when  it  chooses,  proves  conclu- 
sively that  the  existence  of  capitalism  is  not  the  only 
method  by  which  society  can  enjoy  the  benefits  arising 
from  the  cooperative  use  of  its  surplus  productions. 

Does  capital  The  only  remaining  ground  upon  which  the 
earn  its  own  hire  of  capital  can  be  ethically  justified  is 
hire?  that  it  earns  its  own  hire.  It  has  already 

been  shown  that  the  borrower  assumes  the  risk  of  loss 
and  undertakes  to  renew  the  production  without  which 
it  would  soon  become  unfit  for  use,  and  likewise  that  the 
owner,  along  with  all  others,  receives  a  positive  benefit 
from  such  use.  Capital  is  inert  and  of  itself  can  produce 
nothing.  It  is  labor  that  produces — the  joint  effort  of  the 


CAPITALISM  85 


mind  and  body  of  man.  If  the  worker  confers  protection 
and  benefit  by  preserving  and  using  an  otherwise  perish- 
able thing  so  that  its  owner  in  common  with  others  may 
possess  and  enjoy  a  variety  of  things  that  give  him  satis- 
faction and  comfort,  can  this  worker  be,  morally,  called 
upon  to  surrender  a  part  of  his  production  as  remunera- 
tion to  one  who  has  already  been  the  recipient  of  valuable 
considerations  without  which  he  must  necessarily  have 
lost  his  savings?  If  anyone  is  to  be  paid  as  an  incentive 
to  stimulate  the  operation,  it  would  seem  to  be  more  justly 
due  the  worker  than  the  investor.  The  use  of  surplus 
capital  makes  possible  the  increased  effectiveness  of  labor 
and  the  good  arising  from  it  eventually  inures  to  the 
benefit  of  all. 

The  entire  surplus  production,  even  though  owned  in- 
dividually, should  be  a  common  fund  for  facilitating  the 
world's  business.  Its  safety  should  be  assured,  its  repro- 
duction arranged  for  and  its  beneficial  use  guaranteed. 
The  participation  of  the  owners  in  the  general  good  that 
would  result,  along  with  the  opportunity  to  draw  upon 
this  fund  at  will  to  the  extent  of  their  ownership  for  con- 
sumptive use,  would  fully  meet  all  ethical  claims  they 
would  have.  Under  this  policy  there  would  still  remain 
11  the  necessary  incentives  to  encourage  production  and 
romote  savings.  Cooperation  would  increase  and  the 
opportunities  for  moral  development  would  be  greatly 
multiplied.  Capitalism  can  be  justified  and  practiced  on 
the  grounds  of  expediency  as  long  as  it  is  the  most  effi- 
cient instrument  available,  but  its  lack  of  moral  founda- 
tion leads  to  the  conclusion  that  its  full  development  will 
inevitably  lead  to  its  elimination. 


CHAPTER  V. 

THE  DIVISION  OF  PRODUCTION  UNDER  CAPITALISM. 

Ideal  distri-  The  sum  of  the  social  product,  if  all  mem- 
bution.  berg  Of  society  were  self -sustaining,  should 

be  divided  between  them  in  the  proportion  that  each  had 
contributed  to  its  creation,  but  no  such  ideal  condition 
exists. 

Class  Society  may  be  divided  into  three  classes, 

divisions.  partially  dependent,  dependent,  and  inde- 
pendent. The  members  of  the  first  produce  less  than  they 
consume  and  their  store  must  be  supplemented,  those  of 
the  second  produce  nothing  and  must  be  supported  by 
others,  and  those  of  the  third  produce  at  least  as  much  as 
they  consume.  The  first  two  classes  to  the  extent  that 
they  receive  aid  are  a  charge  upon  the  independent  class. 

Communistic  The  amount  necessary  to  the  discharge  of 
contribution  ^js  communal  obligation  is  necessarily  sub- 
no  a  ways  tracted  from  the  general  fund  of  products, 
hence  lessens  the  portions  of  the  workers. 
While  this  is  true  of  any  division  at  any  given  time,  it 
does  not  follow  that  all  expenditure  for  communistic  pur- 
poses is  a  diminution  of  the  worker's  return,  since  such 
disposition  of  a  part  of  the  amount  produced  may  cause 
greater  production  than  would  have  resulted  if  no  such 
expenditure  had  been  made. 

The  amount  expended  for  good  government,  education, 
road  building,  etc.,  while  an  immediate  loss  to  the  work- 
ers, in  the  course  of  time  greatly  increases  production, 
repaying  all  that  they  cost  and  actually  increasing  the 
sum  that  is  to  be  divided.  Remove  the  protection  that 
government  gives  and  stop  the  mind  development  that 

86 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    87 

education  promotes  and  production  would  be  enormously 
decreased.  Discontinue  the  protection  and  care  that 
society  extends  to  its  weak  and  helpless  members  and  it 
would  soon  begin  its  descent  to  the  brute  level,  becoming 
steadily  more  predatory  and  less  productive  as  its  moral 
standard  fell.  Proper  expenditure,  then,  for  these  com- 
munistic purposes  is  no  deprivation  but  rather  an  incen- 
tive to  higher  aims  and  greater  efficiency. 

The  dependents  that  injure  the  workers  are  those  who 
can  and  will  not  work.  The  inefficient  worker  "soldier- 
ing" on  the  job,  the  able  bodied  tramp  and  that  still  more 

costly  dependent,  the  idle  rich,  are  parasites 
parasite  on  ^e  k0(ty  politic.  These  are  they  who  live 

upon  bread  they  have  not  earned,  prolong- 
ing their  useless  lives  by  subtracting  from  the  portion 
that  goes  to  the  honest  worker.  The  rich  man  or  woman 
who  does  not  earn  what  he  consumes  is,  in  an  economic 
sense,  quite  as  much  of  a  pauper  as  the  "Weary  Willie" 
who  begs  or  steals  his  bread.  Society  can  much  better 
afford  to  support  the  latter  since  his  consumption  is  much 
smaller. 

Division  of  These  communistic  obligations  discharged, 
production,  ^he  remainder  of  the  production  under  an 
ideal  capitalism  would  be  divided  as  follows : 

1.  The  hire  of  capital ; 

2.  Wages  or  compensation  for  services,  mental  and 
physical ; 

3.  Insurance  fund  to  protect  invested  capital ; 

4.  The  amount  necessary  to  provide  additional  cap- 
ital to  take  care  of  the  increase  of  the  business. 

If  borrowed  capital  is  to  be  used,  the  amount  of  the 
product  necessary  to  pay  sufficient  hire  to  induce  owners 


88  THE  WAY  OUT 


to  loan  it  is  absolutely  essential.  Assuming  that  the 
profit  on  the  insurance  account  balances  the  losses,  there 
would  be  no  net  loss  to  the  workers  in  this  item.  The 
amount  taken  by  the  owners  of  the  operation  to  enlarge 
the  capital  to  take  care  of  increased  business,  even  in  the 
ideal,  is  an  exaction  made  upon  the  workers  because  of  a 
basic  weakness  in  the  structure  of  capitalism.  Without 
the  power  to  take  this  amount  necessary  to  insure  its 
growth,  capitalism  would  not  only  become  static  but  must 
perish.  Let  us  call  this  item  profit,  or  that 
Profit  divests  which  the  operation  takes  in  excess  of  what 

the  worker  of       .       .  *,  ,,         ,          ,          .      . 

title  without  xt  Slves-  What  actually  takes  place  is  that 
compensation,  the  worker's  share  is  diminished  to  the  ex- 
tent of  the  profit,  and  wages  are  the  part 
of  this  diminished  residue  of  production  which  each 
worker  gets  in  the  proportion  that  he  contributes  to  the 
production.  It  will  be  noted,  too,  that  the  title  to  this 
part  taken  as  profit  passes  from  the  worker  to  the  owner 
of  the  operation  and  the  latter  gives  nothing  in  return 
for  it. 

Capitalism  Profit  is,  then,  a  tribute  which  the  owners 
makes  classes.  Of  ^e  economic  machine  impose  upon  the 
workers,  and  the  fact  that  the  possession  of  the  instru- 
ments of  production  gives  these  owners  this  power  makes 
of  them  a  distinct  class  possessing  a  special  privilege.  So 
long  as  this  capital  or  profit  fund  is  devoted  to  produc- 
tive purposes  the  workers  are  not  economically  injured 
except  to  the  extent  that  it  may  be  made  the  source  of 
hire  for  capital  and  used  for  consumptive  purposes.  This 
is  true  because  the  surplus  necessary  to  efficient  produc- 
tion should  be  so  used  and  if  the  title  to  it  had  remained 
in  the  worker  it  still  would  not  have  been  available  for 
consumption. 


: 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    89 

Capitalism  The  wrong  consists  in  taking  from  the 
inethical.  worker  his  property  without  compensation 
and  vesting  the  title  in  one  who  has  no  just  claim  to  it. 
This  act  of  expropriation  of  a  part  of  the  worker's  pro- 
duction is  a  violation  of  the  ethical  principle  and  in  con- 
travention of  the  socialistic  theory  that  the  worker  is 
justly  entitled  to  all  that  he  produces.  It  is  not  uncom- 
mon to  hear  the  beneficiaries  of  this  unjust  expropriation 
defend  in  strong  terms  what  they  call  the 
ig  s  o  pn-  rights  Of  private  property  when  they  them- 
vate  property  r.,  •  i  *  ,1 

violated  selves  are  the  most  flagrant  violators  of  the 

principle.  What  they  perhaps  unconsciously 
mean  is  to  assert  their  right  to  hold  safe  from  harm  the 
property  belonging  to  others  which  they  have  taken  and 
for  which  they  have  not  given  anything  in  return.  It  is 
unquestionably  a  sound  and  altogether  important  prin- 
ciple that  every  worker,  both  of  brain  and  hand,  after  dis- 
charging his  communal  obligations  has  an 

Eights  to  one's     .,?.,,        .   ,  ,  . ,  , 

property  indefeasible  right  to  the  property  he  pro- 

duces, and  there  are  only  two  legitimate 
ways  by  which  he  can  divest  himself  of  it,  viz.,  either  by 
gift  or  exchange.  If  he  is  protected  in  this  right  his 
title  to  his  own  property  must  remain  in  him  until  he  vol- 
untarily divests  himself  of  it,  whatever  use  may  be  made 
of  the  property  itself. 

Aside  from  the  individual's  duty  to  contribute  to  the 
government  for  public  purposes  and  such  voluntary  con- 
tributions as  he  may  choose  to  make  to  communistic 
causes,  it  is  clear  that  his  right  to  his  own  property  should 
not  be  invaded.  The  sacredness  of  private  property,  to 
use  a  pet  phrase  of  those  whose  practices  are  least  in 
accord  with  the  principle,  should  attach  to  everyone's  pri- 
vate property  from  the  lowest  menial  to  the  highest  mag- 
nate. If  this  were  done,  capitalism  would  become  im- 
possible, for  its  life  tenure  hangs  on  the  special  privilege 


90  THE  WAY  OUT 


of  violating  the  rights  of  private  property  in  the  hands 
of  its  original  and  rightful  owners.  In  this  expropria- 
tion we  find  the  basic  and  ineradicable  antagonism  be- 
tween those  class  interests  commonly  called 
Capital  and  Labor.  It  is  not  to  be  denied 
that  abuse  from  either  or  both  sides  of  the 
controversy  greatly  aggravates  the  situation,  but  the 
point  to  be  impressed  is,  that  if  no  abuses  existed,  if  the 
employers  only  expropriated  so  much  as  was  actually 
necessary  to  highly  efficient  production  and  used  it  ex- 
clusively for  that  purpose,  and  the  workers  worked  ever 
so  efficiently,  there  would  still  remain  like  a  thorn  in  the 
body  politic  that  resentment  that  must  follow  injustice 
and  that  spirit  of  suspicion  and  mistrust  that  fills  the 
breast  of  him  who  succeeds  in  taking  from  his  neighbor 
any  part  of  his  goods  without  giving  adequate  return 
therefor.  If,  then,  capitalism  in  the  ideal  shows  such 
fatal  moral  defect,  what  can  be  said  of  it  in  its  practical, 
everyday  grossness? 

Capitalism  The  fact  that  the  very  life  of  capitalism 
necessarily  depends  upon  its  ability  to  take  from  the 
produces  evil  worker  a  part  of  his  earnings  without  com- 
pensating him  for  it  makes  of  it  a  law- 
breaker, a  disturber  of  the  peace,  a  source  of  infinite 
manifestations  of  evil.  Under  it  the  fundamental  reason 
for  cooperation,  service,  is  obscured  by  an  ever  increasing 
greed  that  fattens  upon  what  it  feeds  upon  and,  octopus- 
like,  reaches  out  its  tentacles  to  grasp  in  its  strangling 
embrace  all  material  wealth,  power,  and  control.  The 
mere  material  deprivation  is  perhaps  the  least  harm  that 
it  occasions. 

The  law  of  Mutual  effort  for  mutual  benefit  is  the  law, 
cooperation.  an(j  jf  ^e  distribution  is  not  in  accord  with 
it  and  the  worker  does  not  receive  the  full  result  of  his 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    91 

effort,  there  follows  a  corresponding  loss  in  effectiveness 
and  a  dissatisfaction  that  is  directly  repressive  in  its 
effect.  When  the  owner  of  the  productive  machinery  as- 
sumes, as  he  must  do  under  capitalism,  to  take  to  himself 
an  undue  share  of  the  common  benefit,  this  act  carries 
with  it  discord  and  contention  that  injustice  and  viola- 
tion of  fundamental  law  always  superinduce. 

If  the  ethical  method  under  which  each  worker  re- 
ceives his  just  share  of  the  production  is  not  employed, 
the  division  between  employer  and  employee  becomes  a 
confused  process  filled  with  incongruities  that  defy 
analysis  and  proper  classification.  To  depart  from  jus- 
tice, the  polar  star  of  economics,  is  to  drift  without  rud- 
der or  compass.  Under  such  conditions  there  is  no  law, 
no  morals,  only  a  struggling  horde  of  selfish 
Selfish  struggle  mortals  acting  without  reason,  without 

under  .   .  ,     .         ,,     ' ,  .  ,     . 

capitalism  right,  impelled  by  insane  desire  to  get  pos- 
session of  material  wealth  without  much 
concern  about  the  methods  of  accomplishing  the  desired 
result.  In  the  mad  struggle  the  highest  thing  to  be  hoped 
for  is  the  acquisition  of  sufficient  power  to  crush  out  the 
independence  and  life  of  the  weaker  elements. 

Under  practical  capitalism,  the  insurance  fund,  the 
amount  taken  to  increase  the  invested  capital  and  to  pay 

returns  to  the  owners  of  the  business  organ- 
Net  earnings.  ....  -iii-i  • 

ization,  is  represented  by  the  net  earnings 

or  profits  of  the  operation.    In  making  the  addition  to  the 

cost  of  the  service  to  get  these  profits,  the  rule  is  to  put 

on  all  the  business  will  bear,  that  is  to  say, 

to  set  the  sale  price  at  the  point  that  will 

ness  will  bear.         .  mu  •    j 

yield  the  largest  net  returns.  This  does  not 
necessarily  mean  the  highest  price  that  the  owner  could 
exact.  There  is  a  point  at  which,  if  the  price  is  further 
enhanced,  it  causes  a  diminution  of  consumption,  and 


92  THE  WAY  OUT 


therefore  the  article  at  a  lower  price  with  increased  use 
will  yield  a  larger  sum  of  profits  at  the  lower  price  than 
it  would  at  the  higher. 

Capitalism's  Capitalism  requires  that  invested  capital 
ever  increasing  g^u  have  fts  return,  therefore  the  amount 
exaction.  expropriated  from  the  workers  one  year  be- 

comes invested  capital  the  next,  thus  requiring  each  year 
a  larger  share  of  the  workers'  production  to  pay  this 
additional  return.  Thus  it  is  obvious  that  progressively 
the  capitalists  will,  to  the  extent  of  the  addition  to  sur- 
plus, increase  the  percentage  of  their  ownership  of  the 
machinery  of  production  and  transportation,  and  the 
workers  must  constantly  undergo  greater  spoliation. 

It  is  possible  that  even  under  this  condition  the  workers 
may  receive  even  more  than  they  did  formerly  because 
the  greater  aggregation  made  by  the  owners  may  in- 
crease the  efficiency  of  production  to  such  an  extent  as  to 
enable  them  to  give  the  workers  quite  as  much  and  pos- 
sibly more  than  they  before  received  and  expropriate 
only  a  part  of  the  actual  increase  resulting  from  more 
efficient  production.  This  process  can  continue  so  long  as 
production  is  being  constantly  improved,  but  when  a  high 
degree  of  efficiency  has  been  reached,  as  must  at  some 
time  happen,  the  additional  exaction  of  capitalism  must 
have  the  effect  of  constantly  reducing  the  worker's  share. 
Carried  through  its  logical  course,  capitalism  must  even- 
tually reduce  the  share  of  the  worker  to  a  scale  that  will 
yield  only  a  sufficient  amount  to  sustain  him  as  a  work 
animal  and  preserve  sufficient  virility  to  reproduce  his 
kind.  In  a  fully  developed  civilization  under  capitalism, 
it  would  seem  to  be  necessary  that  a  static  condition 
should  eventually  exist,  under  which  even  the  expropri- 
ator must  abate  his  exactions  sufficiently  to  maintain  the 
above  referred  to  status  of  the  laborer. 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    93 

A  "fair  If  a  capitalistic  enterprise  begins  operation 

return."  wfth  a  million  dollars  it  demands  a  "fair 

return"  on  this  amount,  and  when  this  exaction  from  the 
public  amounts  to  an  additional  million  it  proceeds  to 
claim  a  "fair  return"  on  two  million.  The  simple  public 
has  furnished  this  additional  capital,  yet  is  called  upon 
to  pay  double  the  amount  that  it  had  to  pay  for  the  use 
of  capital  before  it  permitted  itself  to  be  exploited.  In 
other  words,  the  more  the  people  are  ex- 
ezactions  ploited  the  larger  the  amount  they  must 
pay,  presumably  as  a  punishment  for  their 
ignorance  in  permitting  the  exploitation.  This  unmoral 
practice  of  taking  the  private  property  of  the  workers 
without  consideration  is  bad  enough,  but  insult  is  added 
to  injury  when  the  exploiter  compels  the  losers  to  pay 
more  tribute  because  they  were  despoiled.  The  existence 
of  such  a  wrong  is  a  sad  commentary  on  the  mental  ca- 
pacity of  a  society  that  permits  it. 

If  the  rights  of  private  property  were  to  be  asserted 
and  it  had  to  be  returned  to  those  to  whom  it  ethically  be- 
longed, there  are  few  capitalistic  organizations  that 
could  make  restitution  and  remain  solvent.  Under  con- 
ditions as  they  exist  to-day,  practical  considerations 
make  it  much  more  important  to  sustain  the  right  to  re- 
tain possession  of  property  acquired  by  exploitation  than 
to  defend  the  rights  of  those  who  rightfully  own  what 
they  possess. 

Each  permissible  cooperation  should  have  social  service 
for  its  object,  but  the  existence  and  the  success  of  the  cap- 
italist system  depend  upon  the  exercise  of  special  privi- 
lege that  enables  the  privileged  class  to  levy  tribute  upon 
society,   and  naturally  the  acquisition  of 
service  second     PY0^  becomes  primary  and  service  second- 
ary.    Under  this  condition  the  maxim  be- 
comes, "Get  all  you  can,  giving  as  little  as  possible  in  re- 


94  THE  WAY  OUT 


turn."   Capitalism  is  responsible  for  the  spread  of  this 
dishonest  and  thoroughly  reprehensible  doctrine.     Like 
leaven  it  has  permeated  the  whole  social  body  and  influ- 
ences practically  all  elements  of  society.     Buy  in  the 
cheap  market  and  sell  in  the  dear  one  is  not  confined  to 
the  employer  and  trader,  for  it  has  made  a  deep  impres- 
sion on  the  workers'  consciousness  and  they,  too,  practice 
this  rule  of  capitalism,  getting  all  they  can, 
mp  oyer  an      many  Of  them  giving  as  little  as  possible  in 

employee  af-  />,  n  i  -          ^ 

fected  alike  return.  Generally  speaking,  the  employer 
is  ever  ready  to  denounce  the  worker  for  his 
insatiable  greed,  his  dishonest  inefficiency  and  neglect  to 
perform  his  part  faithfully,  seemingly  oblivious  of  the 
fact  that  both  he  and  the  worker  are  conforming  to  the 
same  principle.  Each  is  doing  his  best  to  get  more  than 
he  gives. 

Spreading  the  The  more  astute  owners  of  the  social  ma- 
base  of  cap-  chinery  realize  that  the  continuous  opera- 
tion of  exploitation  dangerously  narrows 
the  foundation  of  capitalism,  and  therefore  are  trying 
various  methods  of  increasing  the  numbers  of  the  ex- 
ploiters so  as  to  give  greater  stability  to  the  system.  A 
favorite  plan  is  to  induce  the  workers  in  the  various  oper- 
ations to  become  stockholders  and  thereby  become  sharers 
in  the  ownership  of  the  surplus.  If  the  employees  in  all 
manufacturing  and  industrial  operations  could  be  in- 
duced to  invest  their  savings  in  the  shares  of  their  respec- 
tive enterprises  and  thus  become  beneficiaries  of  the  ex- 
ploitation it  would  still  leave  in  the  exploited  class  a  large 
proportion  of  the  workers,  notably  the  farmers  and 
salaried  classes  in  non-industrial  and  non-commercial  op- 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    95 

erations.    In  other  words,  if  the  employers 
Enlarging  the     an(j  empi0yees  jn  any  given  industry  or  un- 

exploitmg  class  L  i  •         T_      -         ,1  .1 

not  a  cure  for  dertakmg  having  the  power  to  name  the 
exploitation.  price  of  the  service  should  cooperate  to 
share  fairly  between  themselves  the  profits 
resulting  from  the  operation,  the  only  effect  of  it  would 
be  to  enlarge  the  exploiting  class  and  it  would  in  no  sense 
be  a  cure  for  exploitation. 

It  is  charged  that  the  possessors  of  great  wealth, 
largely  invested  as  it  must  be  in  the  instruments  of  pro- 
duction and  transportation,  are  bestowing 

Poisoning  the      ^^  libeYal  handg  a     arfc  of  thejr  holdings 
springs  of  edu-     .       .  ,.  ,.  .  , 

cation  and  be-  m  these  monopolistic  enterprises  upon  edu- 
nevolence.  cational  and  benevolent  organizations  with 
the  purpose  of  creating  a  community  in- 
terest in  the  existing  order.  It  is  obvious  that  these  in- 
stitutions, when  their  life  and  growth  are  made  depend- 
ent upon  the  success  of  the  earning  power  of  private 
monopoly,  will  naturally  exert  their  influence  to  main- 
tain it.  It  is  further  charged  that  educational  institu- 
tions are  made  the  beneficiaries  of  spoliation  so  that  their 
teaching  of  economics  and  ethics  may  be  made  to  conform 
to  the  demands  of  the  capitalist  system.  It  will  be  readily 
seen  that  such  a  condition  would  offer  an  inviting  oppor- 
tunity to  prejudice  the  minds  of  the  youth  of  the  land  in 
favor  of  the  existing  order  and  at  the  same  time  poison 
the  very  springs  of  truth.  Whether  these  charges  are 
well  founded  or  not  is  a  matter  that  might  well  be  inves- 
tigated, for  nothing  would  be  more  detrimental  to  the 
progress  of  free  government  and  social  development  than 
to  permit  the  existence  of  such  a  powerful  influence  di- 
rectly interested  in  the  suppression  of  truth. 


96  THE  WAY  OUT 


Is  economic  It  would  be  informing  to  know  how  many 
expression  universities  and  colleges  in  this  country  at 
present  allow  free  expression  on  economic 
subjects  if  it  chances  to  be  adverse  to  the  established 
system. 

The  nearest  possible  approach  under  private  initiative 
to  a  proper  remedy  for  exploitation  will  perhaps  be  found 

^ .  in  private  cooperation  under  which  the  co- 

Private  coop-      ..    r  «       .  ,    ,_ 

eratives  operators  lurnish  the  necessary  aggrega- 

tion of  capital  to  operate  efficiently  for  the 
members.  In  such  case  only  the  members  would  be 
served.  If  the  service  were  extended  to  outsiders  who  had 
not  contributed  the  capital  required,  it  would  give  them 
an  advantage  over  the  members  which  would  not  be  con- 
ducive to  the  growth  and  life  of  the  enterprise. 

Profit  sharing  A  combination  of  the  employers  and  em- 
not  a  remedy,  ployees  to  insure  larger  profits  and  higher 
wages  is  by  no  means  a  remedy  for  exploitation.  The 
effect  of  such  a  policy  would  be  to  aggravate  it.  In  such  a 
case  a  community  of  interest  is  established  for  the  pur- 
pose of  increasing  the  exactions  which  the  public  must 
pay.  Expropriation  is  none  the  less  indefensible  because 
the  number  of  the  exploiters  is  increased.  Profit  shar- 
ing, except  in  so  far  as  it  may  be  a  method  of  adjusting 
wages  more  equably,  holds  out  little  hope  of  solving  the 
problem. 

The  ultimate  effect  of  capitalism  is  to  make  a  few  rich 

and  many  poor.    Under  this  system  the  important  thing 

is  to  get  control  of  the  machinery  of  produc- 

Capitaiistic        tion  and  transportation.     This  machinery 

control  of  ,.  .    ,.      -  „          .,    J 

transportation    ^presents  the  most  stable  form  of  capital. 

It  requires  less  effort  to  keep  it  in  repair,  or 

expressed  differently,  its  reproduction  is  extended  over 

a  longer  time  than  more  mobile  forms  of  wealth.    The 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    97 

thing  of  most  importance,  however,  is  that  it  puts  in  the 
hands  of  its  owners  an  instrument  which  is  used  to  com- 
pel the  public  to  surrender  an  excessive  part  of  its  pro- 
ductions for  the  service  rendered.  The  owner  of  the  mill 
regulates  the  toll,  the  manufacturer  names  the  price  of 
the  finished  product,  and  the  railroad  names  the  rates  at 
which  it  will  haul  freight  and  transport  passengers.  It 
may  be  answered  that  commissions  and  other  agencies 
have  been  instituted  by  the  public  to  deal  with  such  cases 
as  involve  the  need  for  public  protection,  but 
it  has  already  been  shown  that  if  capitalism 

regulation  .        _  .,.  .  . 

impossible  1S  ™  "e  ^e  Prevailing  economic  system,  it, 
in  order  to  live  and  grow,  must  be  permitted 
to  exploit  the  public,  and  if  supervising  agencies,  repre- 
senting the  public,  restrict  exploitation  below  a  certain 
point  they  make  satisfactory  service  impossible.  These 
agencies  are,  then,  under  economic  necessity  to  refrain 
from  eradicating  the  evil  inherent  in  the  system. 

Ownership  and  control  are  inseparable.  If  public 
agencies  are  really  to  control,  then  the  public  must  own. 
What  practically  happens,  so  long  as  private  ownership 
lasts,  is  that  the  owners  control  the  public  agencies.  No 
reflection  is  here  intended,  nor  should  any  be  inferred, 
upon  the  probity  or  good  faith  of  these  commissions.  The 
idea  that  is  intended  to  be  conveyed  is  that  the  public  has 
created  these  commissions  and  given  them  an  impossible 
task.  It  has  elected  to  have  a  system  that  lives,  moves, 
and  has  its  being  by  virtue  of  exploitation,  and  at  the 
same  time  has  created  commissions  to  control  it,  but  has 
decreed  they  must  do  so  in  such  a  way  as  to  preserve  the 
system  intact,  an  utterly  impossible  proposition!  The 

ild-like  faith  of  the  average  citizen  in  the  efficacy  of  reg- 
ulatory statutes  to  correct  the  evils  arising  from  the  ap- 
plication of  unsound  principles  is  tragic  in  its  simplicity. 
Neither  time  nor  experience  seems  to  dwarf  it.  Each 


98  THE  WAY  OUT 


succeeding  legislative  body  brings  with  it  its  flood  of  such 
bills,  which  as  remedial  agents  are  not  worth  the  good 
white  paper  upon  which  they  are  drawn.  Like  the  be- 
lievers in  the  old-fashioned,  large,  nauseous  bread  pills, 
a  gullible  public  swallows  with  avidity  these  legislative 
nostrums  without  adding  the  proverbial  grain  of  salt. 
Apparently  no  effect  follows  these  doses  except  an  in- 
crease of  the  public's  desire  for  demagogism  and  political 
charlatanry,  which  a  horde  of  willing  servitors  do  not 
appear  to  be  able  to  satiate.  While  this  state  of  the  public 
mind  lasts,  the  lobbyist  may  feel  that  his  trade  will  flour- 
ish and  the  exploiter  may  continue  unmolested  the  prac- 
tice of  divesting  Simple  Simon  of  his  surplus. 

The  exploiters  Reverting  to  the  proposition  of  increasing 
few,  the  ex-  ^e  number  Of  the  beneficiaries  of  the  profit 

plotted  many.       taken  f  n)m  ^  workerg>  it  ig  obvious  that  it 

is  impossible  by  a  voluntary  association  to  get  any  con- 
siderable proportion  to  become  investors,  hence  a  large 
class  must  remain  outside  who  would  be  exploited  and 
the  ultimate  effect  of  the  policy,  even  under  the  most  be- 
nevolent direction,  must  be  to  vest  the  ownership  of  the 
means  of  production,  transportation  and  transmission  in 
the  hands  of  the  few  wealthy,  and  while  it  may  not  follow 
that  the  poor  would  become  poorer,  the  few  rich  would 
surely  become  richer,  thus  increasing  the  disparity  be- 
tween the  many  very  poor  and  the  few  very  rich. 

Capitalism,  then,  is  a  cause  of  class  division.    Its  ex- 
istence depends  upon  privilege  and  nothing  save  its  elim- 
ination can  cure  this  defect.    The  greatest 
The  evil  of         eyij  of  capitaiism  js  capitalism  itself.     It 

capitalism  is  ,.  ^  .,          ,,      ,         ».        «       ..  ,. 

capitalism  cannot  distribute  the  benefits  of  cooperative 
itself.  effort  with  even-handed  justice  and  there- 

fore under  the  most  altruistic  purpose  it 
must  fall  short  of  reaching  the  standards  of  morality  that 


DIVISION  OF  PRODUCTION  UNDER  CAPITALISM    99 

would  entitle  it  to  be  considered  as  a  permanent  system. 
It  owes  its  origin  to  social  imperfection  and  its  founda- 
tion must  of  necessity  crumble  as  man  lifts  himself 
higher  in  the  scale  of  intellectual  and  moral  advance- 
ment. 

Capitalism,  then,  is  a  system  more  easily  apologized  for 
than  justified.  Its  method  of  division  between  the  em- 
ployer and  the  worker  must  of  necessity  be  unethical.  It 
makes  an  impassable  gulf  between  the  two  classes  that  it 
creates  and  prevents  that  efficient  cooperation  upon 
which  depends  the  realization  of  the  highest  possible  effi- 
ciency. It  arouses  the  jealousy  of  each  class  over  the  suc- 
cess of  the  other,  and  is  directly  responsible  for  the  un- 
reasonable demands  that  the  one  makes  upon  the  other 
in  the  effort  to  share  in  the  supposed  exploitations  that 
either  of  them  may  have  perpetrated  upon  a  helpless  pub- 
lic. The  causes  of  such  destructive  processes  are  in- 
herent in  the  system  itself  and  therefore  are  ineradicable 
under  it. 


CHAPTER  VI. 

BUSINESS  CO-OPERATION. 

The  basis  of  social  organization  is  cooperation.  Its 
origin  dates  from  the  time  that  the  first  two  mortals  came 
into  social  relations.  In  a  broad  sense,  each  part  of  the 

social  mechanism  is  related  to  all  other 
mechanics  parts  and  must  cooperate  with  them.  All 

are  instruments  of  social  service  devoted  to 
the  central  purpose  of  supporting  the  social  unit,  supply- 
ing its  needs  and  gratifying  its  wants.  To  these  agencies 
of  service  we  shall  apply  the  collective  term  "business." 
It  may  be  observed  that  business  being  an  important 
part  of  a  cooperative  unit  must  of  necessity  be  co- 
operative itself. 

Mankind  Historically,  it  is  true  that  mankind  has  al- 

averse  to  ways  been  averse  to  cooperation.  Its  growth 

cooperation.         hag  been  resigted  at  all  timeg<      Men  haye 

tolerated  little  more  of  it  than  force  of  circumstances 
compelled,  but  regardless  of  the  inertia  and  opposition 
that  it  had  to  overcome,  it  has  moved  along  slowly,  it  is 
true,  but  resistlessly  toward  its  goal. 

Here,  too,  we  see  that  natural  instincts  will  and  must 

find  expression.    Human  beings  belong  among  the  classes 

of  gregarious  animals.    Cooperation  is  the 

Cooperation,      jaw  Q£  associati0n.    Man  can  no  more  resist 

association  **s  mandates  than  matter  can  make  itself 
independent  of  the  law  of  gravitation.  As 
the  means  of  transportation  and  transmission  are  im- 
proved, making  social  intercourse  easier  and  the  ex- 
change of  communications  more  rapid,  the  necessity  for 
cooperation  becomes  more  imperative.  The  services  re- 

100 


BUSINESS  CO-OPERATION:-;  :-::  .-.        101 


quired  by  society  compel  cooperation.  No  single  agency 
can  perform  the  entire  task.  The  man  who  cultivates  the 
ground  must  take  the  raw  products  to  the  transporter 
who  carries  them  to  the  mills  and  factories  which  send 
them  to  still  other  factories  that  finish  them  and  send 
them  to  the  wholesaler  who  sends  them  to  the  retailer  who 
delivers  them  to  the  consumer.  The  entire  process  is 
cooperative.  Neither  prejudice  nor  anything  else  can 
change  it.  Cooperation  lives  and  grows  because  of  its 
capacity  to  serve  human  needs,  to  satisfy  human  wants. 
These  needs  and  wants  increase  as  the  mind  of  man  ex- 
pands to  conceive  them  and  only  a  declining  civilization 
can  diminish  them. 

The  foolish  efforts  that  people  make  to  retain  the  bene- 

fits of  cooperation  and  yet  get  rid  of  cooperation  itself 

are  always  futile.    The  more  or  less  general  opposition  to 

the  growth  of  it  proves  that  its  development  proceeds 

more  rapidly  than  the  mentality  of  the  pub- 

Human  inertia.    ,.         m,  X        *      .         .    ,    ,,.  MA* 

he.  The  growing  intelligence  of  the  people 
finally  overcomes  these  destructive  tendencies  and  they 
first  accept,  then  regard  as  indispensible,  the  very  things 
they  vainly  tried  to  destroy.  The  opposition  to  the  intro- 
duction of  machinery  and  the  change  from  small  unit 
production  to  large  are  notable  illustrations  of  the  de- 
structive, reactionary  attitude  that  ignorance  always  as- 
sumes towards  all  improvements  of  method. 

Thinkers,  ad-  The  growth  of  cooperation,  as  already 
vance  agents  stated,  is  always  in  advance  of  the  intellec- 

lization.  of  the  people>  the  reagon  being 


that  the  improved  methods  are  the  work  of  the  thinkers 
who  are  always  far  ahead  of  the  multiude.  They  are  the 
advance  agents  of  civilization,  the  prophets  and  teachers 
who  often  at  a  heavy,  sacrificial  cost,  lead  and  sometimes 
drive  the  less  advanced  multitude  up  to  higher  planes 


102  THE  WAY  OUT 


than  they  of  themselves  would  ever  have  reached.  How 
many  countless  ages  has  this  besotted,  bestial  mass  aim- 
lessly wandered  in  the  wilderness  of  ignorant  selfishness, 
waste,  and  inefficiency,  when  if  it  had  only  opened  its  eyes 
and  entertained  the  vision  it  would  have  realized  that 
Canaan  with  all  its  blessings  lay  invitingly  before  it! 
Indeed,  having  eyes  it  saw  not  and  having  ears  it  heard 
not,  apparently  preferring  to  believe  lies  that  it  might  be 
damned!  After  all,  it  may  have  been  best  that  man 
should  go  through  these  painful,  evolutionary  processes 
in  order  to  prepare  him  for  better  things.  When  the  in- 
ertia and  hopelessness  of  the  mass  are  considered,  one 
may  reconcile  himself  to  any  system,  however  crude,  that 
would  promise  to  lead  out  of  the  regions  of  despair. 

Business,  as  already  pointed  out,  began  its  existence 

as  a  part  of  a  cooperative  whole.    Its  various  elements 

were  composed  of  small  units  and  were 

Business  be-       often  intenseiy  competitive.    As  the  social 

ganm  small  i       i      •  i        j 

units  parts  became  more  closely  interrelated,  a 

process  of  elimination  began,  under  which 
the  weaker  and  less  efficient  factors  began  to  disappear 
and  the  remaining  units  of  service  gradually  grew  larger. 
It  is  not  material  to  this  discussion  whether  the  elimina- 
tion was  effected  by  the  destruction  or  the  absorption  of 
the  smaller  units.  It  at  least  happened  and  still  continues 
to  do  so. 

Community  of  The  larger  the  units  grow  the  closer  they  get 
interest.  jn  touch  with  each  other,  and  the  constant 

tendency  is  to  establish  a  community  of  interest  between 
them,  if  not  in  the  actual  results  of  the  operations,  at 
least  in  the  things  that  affect  the  general  welfare  of  the 
particular  classes  having  common  interest.  This  closer 
relation  between  the  members  of  the  classes  is  in  a  sense 
a  re-adaptation  and  extension  of  the  old  guild  principle. 


BUSINESS  CO-OPERATION 103 

Associations,  Chambers  of  Commerce,  and  similar  organ- 
izations are  entirely  cooperative  and  are  intended  as 
media  through  which  particular  lines  of  interest  may  ex- 
ercise their  influence  in  the  promotion  of  that  which  they 
wish  to  accomplish.  Incidentally  it  may  be  said  that 
these  cooperative  instrumentalities  are  often  the  vehicles 
for  spreading  the  propaganda  of  the  more  astute  leaders 
and  enlisting  the  support  of  the  full  membership  in  be- 
half of  measures  which  are  not  always,  nor  even  often,  in 
the  interest  of  the  uninformed  majority  that  is  usually 
ready  to  give  its  assent  most  readily  to  propositions  it 
least  understands. 

Organized  So  well  organized  is  this  business  of  spread- 
propaganda.  ing  propaganda,  the  press,  the  magazines, 
and  every  avenue  of  publicity  are  so  often  filled  with  it 
that  escape  from  it  is  well  nigh  impossible.  It  is  to  be 
feared  that  this  practice  has  become  so  efficient,  that  it 
has  poisoned  the  sources  of  information  to  such  an  extent 
that  the  public  is  too  often  given,  instead  of  the  facts,  only 
the  things  which  organized  business  wants  it  to  believe  as 
facts.  This  propaganda  covers  all  fields  from  the  elec- 
tion of  a  president,  the  congress  and  the  legislature  of  the 
states,  down  to  the  raising  and  marketing  of  pigs.  The 
tremendous  power  of  business  over  the  press  is  hardly 
suspected  by  the  ordinary  citizen,  and  unless  one  is  gifted 
with  exceptional  ability  to  read  between  the  lines,  the 
printed  page  cannot  at  all  times  be  accepted  either  as  a 
guide  or  a  reliable  source  of  information. 

Perhaps  the  most  potent  reason  for  this  condition  is 
the  fact  that  the  publishing  of  newspapers  and  magazines 
is  a  business,  dependent,  like  all  other  business  conducted 
under  private  initiative,  upon  profit  for  its  life  and 
growth,  and  there  is,  then,  a  common  interest  between  it 


104  THE  WAY  OUT 


and  the  propagandists  who  are  also  subordi- 
nating other  things  to  gain.     This  brings 
of  advertisers  ~ .          „  , .        fe  .  _ .  _  & 

over  the  press.  *"e  P°^lcy  °*  the  publisher  under  the  domi- 
nation of  the  counting  room,  which  makes 
the  publication  fill  the  needs  and  wants  of  the  advertiser 
from  whom  it  gets  its  major  support.  In  theory,  the  edi- 
torial department  of  a  publication  should  be  entirely  dis- 
tinct from  its  business  management.  The  former  should 
be  the  medium  through  which  unbiased  opinion  and  im- 
partial judgment  would  find  expression.  The  advertiser 
should  receive  his  money's  worth  in  the  publicity  afforded 
him  in  the  space  he  buys,  but  there  is  little  doubt  that  this 
condition  in  far  too  many  cases  no  longer  obtains.  The 
more  probable  supposition  is  that  the  serpent  of  greed  has 
extended  its  slimy  trail  from  the  counting  room  through 
the  editorial  sanctum  sanctorum  with  the  result  that  the 
editorial  columns,  instead  of  containing  expositions  of 
truth,  have  in  many  cases  become  the  vehicles  of  propa- 
ganda designed  to  promote  the  interest  of  the  advertisers 
who  pay  most. 

Financial  in-      It  is  apparent,  too,  that  the  powerful  finan- 
terests  influ-       cjaj  interests  become  increasingly  more  in- 

eoiTcedltorial  sistent  that  editorial  p°licy sha11  be  in  ac" 

cord  with  the  things  they  desire  to  promote. 
Either  through  patronage,  partial  or  entire  ownership 
or  community  of  interest  in  publications,  the  direction  of 
public  opinion  is  falling  more  and  more  under  the  power 
of  business.  To  such  an  extent  has  this  already  become 
true,  that  the  public  ear  is  no  longer  given  an  opportunity 
to  hear  much  of  that  which  business  interests  do  not  want 
known.  It  is  not  intended  to  say  that  this  condition  has 
been  effected  through  corruption  as  this  term  is  generally 
understood.  Much  of  it  comes  from  the  community  of 
interest  that  naturally  follows  cooperation  under  private 


BUSINESS  CO-OPERATION 105 

initiative.  The  publication  that  counts  for  much  is  no 
longer  the  production  of  one  or  a  few  individuals  with 
small  capital.  It  is  a  large  organization  requiring  very 
large  investment.  It  falls  naturally  to  the  rich  and  pow- 
erful and  they  either  have  other  large  interests  or  are  in 
friendly  cooperation  with  those  who  have. 

Capitalism  The  publishing  business  functions  on  the 
makes  control  profit  principle  just  as  all  others  do,  hence 
there  is  a  common  bond,  a  mutual  interest 
that  compels  harmonious  action.  Business 
is  a  class  interest,  the  publishing  business  is  a  part  of  it 
and  therefore  naturally  and  inevitably  becomes  a  class 
instrument.  It  is  the  vocal  organs  of  the  capitalist  sys- 
tem. The  more  highly  this  system  is  perfected  the  more 
necessary  it  becomes  that  public  opinion  should  be  con- 
trolled, and  the  more  urgent  the  need  that  propaganda 
should  be  dexterously  woven  in  both  the  news  and  edi- 
torial fabric. 

Railroad  in-  Perhaps  in  no  class  of  business  has  this  art 
fluence  on  )3een  more  highly  developed  than  among  the 
financial  interests  controlling  the  railroads 
of  the  country.  Senator  Robert  M.  Lafollette,  in  a  speech 
in  the  United  States  Senate,  Feb.  21,  1921,  said  of  it:  "I 
know  that  there  was  organized  immediately  a  publicity 
scheme  for  perverting  the  truth.  The  railroad  execu- 
tives who  were  at  the  end  of  their  resources  put  up  the 
pitiful  face  of  having  been  wronged  by  the  taking  over 
of  the  railroads  by  the  government.  But  their  agencies 
of  publicity  are  without  limit  in  the  United  States  to-day, 
and  have  been  for  many  years.  They  were  able  to  create, 
all  the  while  that  the  railroad  system  was  under  govern- 
ment control,  a  false  public  sentiment;  they  were  able  to 
drive  into  the  public  mind  a  wrongful  statement  of  every- 


; 


106  THE  WAY  OUT 


thing  that  pertained  to  government  operation.  The  truth 
will  ultimately  be  known."  During  the  period  to  which 
Senator  Lafollette  refers  almost  every  avenue  of  pub- 
licity reeked  with  their  propaganda  against  government 
operation  of  the  railroad.  It  is  doubtful  if  at  any  period 
there  was  ever  so  great  effort  made  to  prejudice  public 
opinion  or  so  reckless  disregard  of  facts  shown.  The  re- 
sult must  have  been  exceedingly  satisfactory.  The  public 
fairly  reveled  in  the  misrepresentations  and  false  argu- 
ments sent  to  it  by  the  ton,  and  that  weakness  of  human 
nature  to  join  in  destructive  hue  and  cry 

Ine  public  .  n     ,  _  _ 

fooled  insured  the  sympathy  and  cooperation  of 

the  ignorant  multitude  who,  at  the  behest  of 
their  designing  masters,  have  always  been  especially  effi- 
cient in  riveting  their  own  chains. 

The  banking  ln  the  matter  of  leadership  and  control  of 
interest  business,  the  banking  interest  may  be  said 

to  dominate.  The  few  leaders  in  the  finan- 
cial centres  initiate  the  movement  and  it  is  passed  down 
through  the  ever  widening  circle  of  Chambers  of  Com- 
merc,  business  associations,  Boards  of  Trade,  and  corre- 
spondents until  it  has  overspread  the  country.  In  this 
way  they  exercise  an  influence  quite  out  of  proportion 
either  to  their  number  or  to  the  amount  of  resources  they 
command.  The  small  bodies  do  not  consider  their  own 
aggregate  importance.  Each  small  unit  compares  its 
own  lack  of  importance  with  the  relative  strength  of  its 
greater  mentor  and  falls  in  line  to  swell  the  size  of  the 

army  of  followers  ready  to  accept  the  sug- 

gestion  and  do  the  bidding  of  the  few  lead- 
ele  hnt  ers>  w^°  aggre£ately  are  relatively  much 

less  powerful  than  their  followers,  thus  pre- 
senting a  case  of  the  keeper  leading  the  elephant. 


BUSINESS  CO-OPERATION 107 

Growth  of  The  present  rapid  growth  of  class  interests 
class  interest.  (jue  £0  greater  cooperation  has  no  parallel 
in  history.  The  principle  is  very  old  but  the  extent  to 
which  it  has  been  developed  has  never  before  been 
equalled.  When  it  is  considered  that  the  development  of 
a  class  interest  in  any  sphere  of  human  activity  neces- 
sarily causes  the  same  thing  to  take  place  in  other  ave- 
nues, it  is  plain  to  see  that  the  great  concentration  in 
banking,  manufacturing,  and  commerce  must  incite  the 
same  thing  in  labor,  agriculture,  etc.  Whatever  else  may 
be  said  of  the  present  civilization,  it  is  not  proceeding 
along  that  line  of  common  interest  that  has  generally 
been  supposed  to  be  an  indispensible  prerequisite  to  the 
successful  development  of  the  democratic  ideal. 

Extension  of  The  banking  interest  has  greatly  extended 
banking  ac-  }^s  p0wer  an(j  influence  over  business  and  is 
rapidly  coming  to  dominate.  Not  satisfied 
with  the  narrower  sphere  of  banking  as  it  was  formerly 
understood,  it  has  branched  out  into  transportation,  man- 
ufacture, and  commerce  and  is  becoming  more  and  more 
a  dominant  factor  in  every  important  field  of  human  en- 
deavor. The  constantly  increasing  rapprochement  be- 
tween the  banking  business  and  other  business  is  an  en- 
tirely natural  result  of  increased  cooperation.  It  is  true 
that  banking  and  credit  are  just  as  much  a  department 
of  business  as  purchasing  material  or  manufacturing  it. 
In  theory,  the  fully  developed,  efficient  business  would 
have  its  banking  department  and  therefore  the  closer  re- 
lations now  being  established  between  business  and  bank- 
ing are  an  indication  of  an  evolutionary  advance  in  the 
right  direction.  It  may  be  confidently  expected  that  these 
relations  will  continually  grow  closer  and  those  control- 
ling the  credit  resources  of  the  country  will  become  to  a 
still  greater  extent  than  now  the  owners  of  the  instru- 


108  THE  WAY  OUT 


ments  of  social  service.  Expressed  differently,  the  bank- 
ing business  is  in  a  broad  sense  only  a  department  of  that 
collection  of  businesses  that  make  up  the  unit  of  social 
machinery,  i.  e.,  the  machinery  of  production  and  distri- 
bution, the  control  of  which  under  capitalism  must  pro- 
gressively concentrate  in  the  hands  of  the  few  rich. 
When  we  speak,  therefore,  of  the  extension  of  banking 
control  into  new  spheres  of  social  activity,  what  is  ac- 
tually meant  is  that  the  owners  of  the  banking  business 
are  acquiring  an  interest  in  other  branches  of  business. 
It  is  in  the  last  analysis  these  relatively  few  people,  rap- 
idly becoming  dominant  in  social  service  activities  who 
are  the  center  of  power,  and  the  organizations  of  trans- 
portation, transmission,  manufacture,  and  distribution 
are  the  instruments  which  they  use  to  levy  tribute.  The 
profits  derived  from  this  source  constitute  a  fund  from 
which  new  investments  are  made,  thus  enabling  them  to 
acquire  an  ever  increasing  share  in  the  ownership  of  the 
instrumentalities  of  social  service. 

It  is  doubtful  if  society  has  even  an  approximate  esti- 
mate of  the  extent  to  which  concentration  of  ownership 
has  gone.  The  profit  fund  accruing  largely 
accretion7  *°  ^e  ^ew>  ^e  a  snowflake  started  from 
some  lofty  peak,  rapidly  grows  by  accretion 
until  it  finally  becomes  an  avalanche.  Just  so  the  tribute 
taken  from  the  people,  becoming  capital  and  in  turn  de- 
manding a  return  for  its  use,  through  extension  of  in- 
vestments is  yearly  concentrating  in  the  hands  of  the  few 
a  larger  percentage  of  current  production  and  insuring 
an  increased  degree  of  monopolization  of  social  machin- 
ery. If  the  process  is  continued  it  is  manifest  that  it  is 
only  a  question  of  time  when  the  few  rich  will  have  the 
rest  of  mankind  in  a  state  of  vassalage. 

It  is  to  be  noted  that  business  cooperation  establishing 
as  it  does  a  class  interest,  forces  a  division  between  those 


BUSINESS  CO-OPERATION 109 

who  work  and  those  who  own  the  machinery,  but  with 
the  latter  class  should  be  included  the  workers  in  the 
managerial  class,  who  on  account  of  better  compensation 
and  hope  of  promotion  will  naturally  take  sides  with  the 
owners  against  the  elements  who  do  the  more  humble 
work. 

In  whatever  conflict  may  arise  between  the  workers 

on  one  side  and  the  owners  and  the  managing  workers 

on  the  other,  each  class  will  seek  to  gain  the  support  of 

the  outside  public.    In  this  struggle  between  these  two 

classes  the  business  elements,  whether  di- 

6  pu  *?         rectly  interested  or  not,  and  the  general  pub- 
supports  the  J  .          '  .& 

business  class.  llc  Wl11  usua%  glve  at  least  their  moral  sup- 
port to  the  business  class,  while  the  work- 
ing class  immediately  involved  must  rely  upon  their  fel- 
low workers  for  what  assistance  and  moral  support  it  can 
hope  for.  The  lack  of  intelligence  and  solidarity  among 
this  class  makes  its  support  uncertain  and  inefficient. 
Business  in  such  a  contest  has  all  the  better  of  it.  It  has 
wealth,  power,  and  political  influence.  It  can  go  through 
strikes  without  seeing  its  children  suffer  for  bread  and 
shelter,  but  what  constitutes  its  most  powerful  weapon 
is  the  ownership  of  the  social  machinery.  The  stoppage 
of  this  affects  the  comfort  of  the  consuming 

Business  acts  .1-1  .«•  n? 

constructively.    Publlc>  who  ar^  unwilling  to  suffer  mcon- 
veniences  in  order  that  wrongs,  however 
grievous,  may  be  righted.    Business  desires  to  keep  the 
mills  grinding  and  the  trains  moving  because  it  is  in  its 
interest  to  do  so,  and  society  gives  it  hearty  support  in 
whatever  action  may  be  necessary  to  accomplish  this  pur- 
pose.   The  worker  cannot  carry  out  his  pro- 
[hAwTkers       £ram  constructively.    He  must  act  destruc- 

act  destruc-          7*.     ,  .,  .       _   .  , 

tivel  tively  and  in  doing  so  must  cause  not  only 

business  but  the  general  public  to  suffer  in- 
convenience   and   loss.      Business    can    perpetrate    its 


110  THE  WAY  OUT 


wrong  within  the  law  and  without  causing  society  incon- 
venience, hence  can  invoke  the  aid  and  support  of  both. 

Selfish  human  nature  would  prefer  to  be  served  by 

slaves  rather  than  not  be  served  at  all,  and  for  this  reason 

the  worker  can  never  hope  to  enlist  the  sup- 

The  public  ^  0^  ^  p^j^  jn  jtg  effort  to  accomplish 

ciffRinst  in- 

temiption  of      ^8  ends  if  the  same  public  is  to  be  deprived 
service.  °f  the  social  service  that  it  prizes  more 

highly  than  it  does  justice  or  principle.  The 
workers,  if  they  are  to  succeed,  must  adopt  methods  of 
redress  that  do  not  collide  with  this  human  or  inhuman 
trait,  as  one  may  choose  to  call  it.  The  public  will  pa- 
tiently submit  to  being  robbed  either  by  business,  the 
workers,  or  a  combination  of  the  two,  but  deprive  it  of  the 
service  it  requires  and  it  is  up  in  arms  at  once. 

Business  cooperation  seldom  takes  a  destructive  turn 
so  far  as  the  public  is  concerned.  If  it  adopted  the  lock- 
out as  a  means  of  either  offense  or  defense,  it  would  en- 
counter the  same  public  opposition  that  is  shown  against 
the  strike.  Business  has  this  great  advantage  over  the 
workers,  it  can  name  its  terms  of  employment  and  there- 
fore is  always  ready  and  willing  to  supply  the  needs  and 
wants  of  the  public.  If  its  conditions  cannot  be  met  by 
the  workers  and  they  feel  compelled  to  cease  work,  the 
public,  always  superficial,  rarely  looking  to  first  causes, 
holds  the  workers  responsible  for  the  interruption  of  the 
service  and  accordingly  joins  with  business  in  the  effort 
to  compel  the  resumption  of  business  activity. 


Business  coop-  Business  cooperation  in  finance,  manufac- 
eration  reflected  ^ure?  an(j  distribution  must  of  necessity  be 
in  politics.  reflected  in  political  activity.  Business 
under  capitalism  necessarily  involves  a  special  privilege. 
Special  privilege  is  a  social  cancer  which,  when  once  al- 
lowed to  develop,  proceeds  to  permeate  the  entire  body 


BUSINESS  CO-OPERATION 111 

politic  until  the  surgeon's  knife  eradicates  it.  Inevitably, 
business  developed  under  capitalism  and  depending  upon 
special  privilege  for  its  life  and  growth  must  exert  its  in- 
fluence to  prevent  the  enactment  of  laws  that  are  unfa- 
vorable and  to  promote  those  that  are  favorable  to  its  in- 
terest. Special  privilege  exists  either  because  of  the  lack 
of  proper  organization  or  because  of  special  grant  from 
the  sovereign  power.  The  first  calls  for  more  law  in  the 
public  interest  and  the  second  suggests  the  repeal  of  such 
existing  law  as  may  confer  special  favors.  In  either  or 
both  cases  it  becomes  highly  essential  to  its  success  that 
business  should  bring  about  the  closest  cooperation  be- 
tween itself  and  the  government.  It  must  have  control 
of  the  law-making  power  in  order  to  prevent  the  enact- 
ment of  law  that  would  endanger  its  welfare  and  even  its 
existence. 

Special  privi-      The  basic  principle  of  business  under  cap- 

lege  the  basic     italism  is  special  privilege  and  if  this  is 

withdrawn   the   system   itself   must   fall. 

capitalism.  mi         »  .  .  _.     .  7         . 

Therefore,  there  is  no  limit  to  what  it  not 
only  would  but  must  do  to  preserve  its  life.  It  is  under 
an  impelling  motive  to  control  legislation  and  to  have  a 
judiciary  that  will  construe  the  constitution  and  laws  in 
accord  with  the  idea  that  the  capitalistic  system  must  be 
preserved.  It  goes  without  saying  that  the  need  for  a 
sympathetic  executive  is  equally  imperative. 

When  it  is  recognized  that  the  principles  of  special 
privilege  and  those  of  democracy  are  utterly  at  variance 
it  will  be  obvious  that  the  antagonism  between  them  will 
grow  increasingly  intense  as  they  are  developed.  If  both 
continue  to  develop,  a  final  death  struggle  between  them 
will  be  inevitable.  Assuming  that  civilization  will  con- 
tinue to  advance,  that  democracy  is  to  live,  it  becomes  evi- 
dent that  business  under  capitalism  in  increasing  coop- 


112  THE  WAY  OUT 


eration  is  busily  engaged  in  digging  its  own  grave.  The 
more  it  grows,  the  more  efficient  it  becomes,  the  more 
fully  it  becomes  able  to  conform  to  all  that  could  be  ex- 
pected of  it,  the  more  nearly  does  it  approach  the  stage 
when  it  must  of  necessity  give  way  to  a  higher  form  of 
concentration  of  effort. 


CHAPTER  VII. 

LABOR  CO-OPERATION. 

Cooperation  of  Aside  from  that  general  cooperation  in 
workmen.  social  activities  in  which  all  except  the  de- 
pendents and  shirkers  engage,  the  workers  ranking  below 
the  owners  and  managing  workers  cooperate  in  varying 
degrees  among  themselves.  The  general  object  of  this  is 
to  get  benefits  for  the  participants  that  they  cannot  get 
so  well  without  it  and  in  this  respect  it  is  not  different 
from  other  classes  of  cooperation. 

Necessity  of  In  a  system  of  social  development  that  ne- 
laborcoop-  cessitates  class  interests,  it  becomes  neces- 
sary that  the  workers  of  all  grades  should 
unite  for  their  improvement  and  protection.  The  fact 
that  they  often  misuse  the  power  that  combination  puts 
at  their  command  does  not  prove  that  they  should  not 
have  it  to  be  used  for  proper  purposes,  nor  does  the  fact  of 
such  misuse  differentiate  them  from  other  classes  posses- 
sing cooperative  power,  for  the  latter  are  equally  guilty 
of  committing  this  wrong. 

The  workers  are  under  the  same  imperative  necessity 
to  organize  that  employers  are.  The  latter  must  be  eco- 
nomically efficient  if  the  large  productive  unit  is  to  dis- 
place the  small,  and  the  workers  must  cooperate  with  the 
employers  in  the  general  purpose  of  production.  There 
exists,  however,  a  diverse  interest  in  the  matter  of  di- 
vision of  benefits  which  makes  it  absolutely  essential  that 
the  workers  should  organize  as  a  class  so  that  they  will 
have,  as  nearly  as  may  be,  equal  economic  power,  in  order 
that  they  may  meet  employers  upon  equal  terms  when 
questions  involving  contracts  and  division  of  benefits 

113 


114  THE  WAY  OUT 


_  arise.     If  employers  and  employees  are  to 

Freedom  of  .  i   -.  n 

contract  maintain  proper  relations,  freedom  of  con- 

tract must  exist,  for  without  this  indispens- 
ible  prerequisite,  no  real  contract  can  be  made.    To  make 
such  a  contract,  the  minds  of  both  parties  must  meet  wil- 
lingly.   A  forced  agreement,  when  either  or  both  parties 
are  under  compulsion  is  not  in  accord  with  the  principle 
of  contracts,  but  is  made  under  duress  and  while  it  may 
conform  to  the  letter  of  the  law  and  be  en- 
OI  forcible,  it  is  nevertheless  a  product  of  force. 

It  is  the  imposition  of  terms  upon  the 
weaker  by  the  stronger.  The  form  of  the  force  employed 
in  no  wise  improves  the  character  of  the  transaction  nor 
does  it  alter  the  nature  of  the  effects  that  follow  it. 

The  workers  may  accept  the  employers'  terms,  not  be- 
cause they  are  willing  to  do  so,  but  because  they  regard 
them  as  more  tolerable  than  that  which  would  follow  if 
they  did  not  accept.  They  might  prefer  to  work  for  a 
scant  living  because  not  to  do  so  would  deprive  them  and 
their  families  of  all  means  of  a  livelihood. 

Contracts  ml  .   ,  ,  , 

under  duress  They  might  contract  to  work  an  unreason- 
able number  of  hours  because  the  failure  to 
do  so  would  deprive  them  of  any  opportunity  to  work  at 
all.  On  the  other  hand,  the  employer  might  contract  to 
pay  wages  that  would  involve  him  in  loss  because  not  to 
keep  the  operation  going  would  occasion  a  still  greater 
loss,  or  he  might  agree  to  shorten  the  hours  to  such  an 
extent  as  seriously  to  reduce  the  efficiency  of  the  opera- 
tion rather  than  fail  to  carry  out  contracts  that  he  had 
already  made  and  that,  if  breached,  would  permanently 
injure  his  business.  Agreements  of  this  character  are 
not  in  any  true  sense  contracts.  They  are  simply  condi- 
tions imposed  by  the  victor  upon  the  vanquished  and  will 
stand  until  the  latter  again  feels  that  he  is  in  a  position 
to  refuse  further  to  comply  with  them. 


__ LABOR  CO-OPERATION 115 

intention  the  The  preliminaries  to  a  contract  are  vitally 
basis  of  con-  important.  To  make  a  genuine  one,  there 
must  exist  among  all  the  parties  to  it  a  de- 
sire to  agree,  and  this  desire  will  only  be  present  when 
each  feels  that  his  own  interest  is  fully  protected  and  that 
there  is  in  the  act  some  substantial  benefit  for  himself. 
Contracts  are  usually  socialistic  in  character  in  that  they 
are  made  on  the  assumption  that  each  must  receive  ade- 
quate consideration  for  all  that  he  concedes. 

The  ideal  contract  is  that  which  assures  equal  and 
exact  justice  to  all  concerned.  The  motives  of  the  con- 
tracting parties  should  spring  from  an  honest  purpose. 
Under  this  conception  of  the  nature  of  a  contract,  neither 
the  employer  nor  the  employee  should  wish  to  overreach 
the  other  but  both  should  aim  to  arrive  at  terms  that 
would  be  fair  to  each  other.  The  rule  should  be  fairness 
in  essentials  and  accommodation  in  non-essentials. 

Mutual  con-       The  idea  of  the  employer  buying  labor  in  the 

sideration          cheapest  market  and  the  worker  selling  his 

Louid  control    serviceg  in  the  dearest  is  entirely  at  vari- 

contractors.  .,1,1  •   •,/./»•  -,  i 

ance  with  the  spirit  of  fairness  and  mutual 
consideration  that  should  control  both  sides  in  making 
contracts.  Such  an  attitude  of  mind  brings  the  matter  of 
that  which  should  be  a  friendly  adjustment  down  to  the 
low  plane  of  disreputable  horse  traders,  each  seeking  to 
put  over  on  the  other  the  more  inferior  animal,  a  game 
of  force,  fraud,  and  duplicity  which  does  not  end  with  the 
signing  of  the  contract  but  follows  the  operation  under 
it  to  its  end.  It  starts  both  parties  out  with  disregard 
and  distrust  of  each  other  and  leads  to  reprisals  that  ser- 
iously impair  the  efficiency  of  the  operation.  The  em- 
ployer, believing  that  the  worker  feels  no  particular  in- 
terest in  the  welfare  of  the  business  and  that  he  is  at 
every  opportunity  seeking  to  give  as  little  as  possible  for 


116  THE  WAY  OUT 


the  wage  he  receives,  and  the  worker,  on  the  other  hand, 
thinking  that  the  employer  cares  nothing 
for  him  except  what  he  can  get  out  of  his 

tracts  injure        .  . 

both  parties       labor  in  the  way  of  profits,  are  not  in  a  state 
to  them.  of  mind  that  makes  either  for  peaceful  or 

profitable  cooperation.  To  the  casual  ob- 
server, it  seems  obvious  that  both  sides  too  often  start 
wrong. 

A  human  it  is  plain  that  far  better  results  might  be 

problem.  expected  if  both  would  get  their  fundamen- 

tal concepts  in  better  accord  with  common  sense  and  good 
morals  before  undertaking  to  come  to  a  common  under- 
standing and  agreement.  The  thing  that  seems  plainest, 
yet  which  is  of  tenest  overlooked,  is  that  the  employer  and 
employee  problem  is  one  of  human  nature,  and  that  any 
satisfactory  solution  of  it  must  be  in  accord  with  human 
Lab  r  n  t  instincts.  To  undertake  to  make  labor  a 
commodity  commodity  to  be  bought  and  sold  in  the 
market  like  beans  and  potatoes,  or  to  make 
capital  an  entity,  confusing  it  with  the  person  who  em- 
ploys, is  nothing  less  than  an  effort  to  be- 

Capitalnot          F,    J   '          . 

an  entity  cloud  the  issue  and  make  a  proper  analysis 

and  correct  solution  of  it  more  difficult  if  not 
entirely  impossible.  Divested  of  these  imposed  obscuri- 
ties the  matter  is  reduced  to  the  very  simple  proposition 
of  searching  out  the  right  and  justice  of  the  case  and 
writing  into  the  contract  the  best  judgment  of  all  parties 
concerned,  thus  putting  behind  the  instrument  their  col- 
lective conscience  to  enforce  its  provisions.  This  may  be 
regarded  as  ideal,  but  it  is  no  more  so  than  the  laws 
against  theft  and  murder  which  are  enf orcible  only  to  the 
extent  that  the  public  judgment  and  conscience  justify 
their  penalties.  In  other  words,  the  agreements  between 
employer  and  employee  must  have  moral  sanction  in 


LABOR  CO-OPERATION 117 

order  to  enlist  the  support  of  public  opinion  in  carrying 
them  out  because  public  opinion  is  and  always  will  be  the 
most  powerful  force  for  compelling  the  fulfillment  of 
social  obligations. 

So  long  as  these  two  classes  are  on  the  plane  of  the 
beasts  of  prey  which  fight  over  the  results  of  the  chase, 
just  so  long  will  there  be  industrial  strife  with  its  result- 
ing inefficiency,  waste,  and  destruction.  The  first  essen- 
tial to  a  contract  is  a  thorough  understanding  by  both 
sides  of  the  things  which  both  must  concede,  that  is  to 
say,  the  conditions  that  cannot  be  changed  even  by  mu- 
tual consent. 

In  a  contract  under  capitalism  the  following  things 
must  be  granted : 

1st.  That  the  capitalist  must  have  a  return  on  his 
capital. 

2d.  That  the  employer  must  be  allowed  to  take  a 
requisite  sum  to  set  aside  as  a  reserve  against  losses. 

3d.  That  the  excess  of  this  reserve  belongs  to  the 
owner  of  the  business  and  is  the  source  from  which  the 
expanding  needs  of  the  business  are  to  be  met. 

4th.  That  which  is  left  of  the  production  after  pro- 
viding for  the  first  three  classes  is  the  wage  fund  from 
which  all  the  workers,  including  owners,  managers,  and 
all  others  who  contribute  labor  to  the  operation  must  be 
paid. 


COI 

th 


The  pay  of  The  division  of  this  last  fund  should  be 
capital  the  strictly  in  accord  with  the  socialistic  rule 
controlling  ^^  each  worker  whether  of  high  or  low  de- 

consideration.  ,  ,  .  ,,  , . 

gree  should  receive  pay  in  the  proportion 
at  his  effort  contributed  to  the  result. 
Wages  are  paid  first,  but  they  are  regulated  with  the 
view  that  full  provision  shall  be  made  for  the  preferred 


118  THE  WAY  OUT 


obligations  because  without  a  belief  on  the  part  of  the 
owner  that  such  will  be  the  case  he  will  not  contract  at  all. 
If  he  errs  in  judgment  and  the  residue  remaining  after 
the  payment  of  wages  is  insufficient  to  meet  these  de- 
mands, the  business  is  unprofitable  and  will  be  abandoned 
if  it  can  be  continued  only  on  this  basis. 

It  is  not  intended  in  this  connection  to  deal  with  the 
ethics  of  capitalism  but  only  to  call  attention  to  the  es- 
sential things  that  are  prerequisite  to  a  contract  between 
employers  and  workers  under  it.    It  may  not  be  amiss, 
too,  to  call  the  attention  of  employees  espec- 
ially to  the  fact  that  the  employers  are  no 
more  responsible  for  the  existence  of  this 
capitalism.         unjust  system  than  they  themselves.     It 
finds  its  support  in  that  ignorant  greed  that 
apparently  rules  in  the  breast  of  most  men,  tempting 
them  to  get  all  they  can  from  others  and  to  give  as  little 
as  possible  in  return  therefor.    Capitalism  is  an  exponent 
of  this  state  of  the  public  mind  and  is  perhaps  the  best 
system  possible  while  that  psychology  continues  to  exist. 

Useless  to  The  efforts  of  employers  to  prevent  the  or- 
attempt  to  ganization  of  workers  will  be  fruitless.  It 

prevent  labor  -g  gu^e  ag  stupid  as  Was  the  public's  fight 
cooperation.  .  ,  .  ,  ..  *.•.** 

against  increased  cooperation  or  the  work- 
ers' efforts  to  prevent  the  improvement  of  method  and  the 
increase  of  efficiency  through  the  introduction  of  machin- 
ery.   The  workers  not  only  have  the  right  to 
organize  organize  but  it  is  their  duty  to  do  so.    They 

should  cooperate  to  the  greatest  possible 
extent  for  proper  purposes.  Among  these  may  be  men- 
tioned education  and  training  in  their  respective  voca- 
tions, the  development  of  their  skill  and  efficiency,  in- 
struction in  and  practice  of  thrift  and  economy,  the  in- 
vestment of  their  surplus  earnings,  the  provision  by  in- 


LABOR  CO-OPERATION 119 

surance  in  the  most  beneficial  form  against  lack  of  em- 
ployment and  for  the  protection  of  their  families  in  case 
of  sickness  or  death,  the  promotion  of  faithful  and  effi- 
cient service,  the  proper  sanitary  and  healthful  working 
conditions  in  the  establishments  in  which  they  labor,  the 
free  choice  and  election  of  their  own  representatives  to 
meet  the  representatives  of  the  employers  to  discuss 
terms  of  labor,  working  hours,  wages,  and  all  other  mat- 
ters involved  in  the  contractual  relations  between  em- 
ployers and  employees. 

In  these  and  in  many  other  things  there  is  a  mutual 
interest  and  the  employees  have  a  clear  right  to  consider 
and  act  on  them  as  an  organized  body.  Any  attempt  on 
the  part  of  the  employer  to  deny  the  employee  this  right 
to  act  in  an  organized  way  is  the  first  step,  not  towards 
industrial  peace  but  war.  It  is  the  effort  to  substitute 
force  for  friendly  agreement  and  arbitrary  power  for 
rational  settlement.  Only  besotted  slaves  will  willingly 
submit  to  any  invasion  or  abridgment  of  these  primary 
rights. 

Erroneous  The  employer  to-day  seems  more  inclined 
to  look  upon  the  organization  of  his  em- 
.zation.  pi0yees  as  an  act  Of  hostility,  a  preparation 
on  their  part  to  begin  a  destructive  warfare  upon  the  en- 
terprise in  which  they  are  both  engaged.  The  workers 
seem  little  different  from  their  employers  in  this  respect. 
They,  certainly  in  the  early  stages  of  organization,  are 
imbued  with  the  importance  of  the  labor  organization  as 
a  fighting  machine,  a  thing  to  be  used  to  compel  the  ac- 
ceptance of  their  terms  and  the  concession  of  their  de- 
mands. Both  sides  seem  too  often  oblivious  of  the  great 
good  that  workers'  organizations  might  be  to  employer 
and  employee.  Were  they  intelligently  conducted  and 


120  THE  WAY  OUT 


their  possibilities  for  good  honestly  developed,  neither 
the  employer  nor  the  employees  could  afford  to  dispense 
with  them.  It  is  far  too  common  that  the  employee  thinks 
of  the  labor  organization  as  an  instrument  designed 
solely  for  getting  more  pay  for  less  work. 

Past  sins  still  Considering  the  ages  through  which  the 
bearing  master  has  driven  the  worker  and  his  fore- 

fathers as  wage  slaves,  showing  neither 
mercy  nor  justice,  it  should  not  surprise  one  that  he  holds 
the  views  above  attributed  to  him.  These  past  sins  are 
still  being  atoned  for  and  much  of  the  present  difficulty  of 
making  proper  social  adjustments  is  fairly  attributable 
to  them. 

Neither  of  these  classes  can  be  properly  understood 
unless  it  is  considered  in  its  relation  both  to  its  past  and 
to  its  present  environment.  The  more  humane  and  ra- 
tional attitude  of  both  to  each  other  is  of  very  recent  date 
and  marks  a  distinct  advance.  They,  coming  into  the 
new  light,  necessarily  see  things  in  a  rather  blurred  way. 
Their  mental  vision  is  still  far  from  normal  and  they 
must  have  time  and  experience  to  enable  them  to  bring 
themselves  into  proper  adjustment  to  their  new  environ- 
ment. It  may  be  observed,  however,  that  the 

Education  the      .  /?-,,•  -ui 

remedy.  increase  of  education  has  been  responsible 

to  a  much  greater  degree  than  is  generally 
supposed  for  the  breaking  down  of  the  old  concepts,  and 
the  introduction  of  new  readjustments  in  the  relations 
between  these  two  classes.  This  fact  has  induced  hope- 
less reactionaries  to  believe  that  the  way  to  peace  leads 
backward  and  that  further  development  of  the  intellec- 
tual force  of  the  workers  should  be  discouraged.  Happily 
this  element  is  small.  For  the  greater  part  of  society 


LABOR  CO-OPERATION 121 

realizes  that  the  mistakes  and  even  the  evils  of  limited 
education  can  best  be  cured  by  more  and  better  educa- 
tion. 

All  progressive  minds  agree  that  the  road  onward  and 
upward  leads  through  the  schoolhouse.  The  fact  that  is 
most  reassuring  to  those  of  liberal  views  is  that  at  no 
time  in  the  world's  history  was  the  mass  so  much  edu- 
cated as  now,  nor  was  there  at  any  previous  time  a  civil- 
ization that  was  comparable  to  that  which  exists  to-day. 
It  has  its  shortcomings  and  even  its  crimes  but  it  is  un- 
questionably superior  to  any  that  ever  pre- 
raised  ceded  it.  Society  is  more  critical  than  form- 

erly, which  shows  that  its  standard  has  been 
raised.  It  sees  more,  therefore  demands  more. 

Economic  The  social  organization  of  the  workers  in 
organization  the  past  has  been  autocratic,  and  is  to  a 
large  degree  so  even  now.  The  dominant 
note  of  it  was  represented  in  the  term  "master  and  serv- 
ant/' The  problem  at  present  is  to  displace  this  over- 
lordship  by  some  practicable  method  that  will  preserve 
and  if  possible  increase  efficiency,  and  the  same  time  dem- 
ocratise the  operation  so  that  to  each,  whether  owner, 
manager,  or  worker,  will  be  preserved  that  individual 

self-respect  that  coercion  of  any  kind  de- 
individual  gt  The  value  of  individual  initiative 

initiative  "^  ~   .  ,  , 

important  as  a  ^ac^or  m  efficiency  has  never  been  gen- 
erally appreciated.  Once  organized  so  that 

this  most  estimable  and  valuable  factor  will  have  full 
play,  society  would  make  rapid  strides. 

Autocracy  re-      \  .,,  .     , 

pressive  Autocracy  either  in  government  or  industry 

represses  it  and  tends  to  make  individual 
effort  mechanical.  It  dwarfs  and  even  atrophies  the  in- 
ventive faculty  without  which  the  man  and  the  mule 
occupy  practically  the  same  plane  in  the  productive  field. 


122  THE  WAY  OUT 


Cooperation  The  cooperation  of  workers  even  for  non- 
deveiops  productive  purposes  makes  them  think  and 

thought.  plan  an(^  when  thig  facu}ty  Of  mjn(j  jg  cane(j 

into  activity,  even  indirectly,  for  one  purpose,  it  will  and 
must  be  used  for  other  things  as  well.  Once  this  power  of 
mind  is  aroused  it  makes  its  influence  felt  in  many  direc- 
tions. Not  only  will  it  compel  readjustments  in  the 
matter  of  wages  and  working  conditions  but  it  will  result 
in  a  better  understanding  of  the  economic  laws  govern- 
ing production,  thereby  increasing  the  productive  power 
of  labor. 

intelligence  Given  a  mass  of  workers  little  above  the  an- 
the  basis  of  thropoid  apes  in  intelligence,  who  would 
efficiency.  submit  to  any  conditions  that  the  employer 
might  impose,  and  who  on  account  of  their  lack  of  under- 
standing require  very  minute  directions,  in  contrast  with 
the  same  number  of  highly  intelligent  workers  capable  of 
class  organization  and  a  large  measure  of  self -direction, 
there  is  no  doubt  that  the  latter  would  be  far  the  more 
profitable  to  the  employer. 

The  more  highly  workers  are  developed  the  less  the  dis- 
tance between  them  and  the  employer.  That  is  to  say,  as 
the  workers  rise  in  the  scale  of  intelligence  there  will  be 
a  corresponding  approach  to  the  level  of  democratic 
equality  between  the  employer  and  employee. 

Jealous  of  It  is  not  strange  that  this  process  should 
power.  arouse  a  spirit  of  opposition  and  distrust  in 

the  minds  of  the  employers.  It  is  a  human  weakness  to 
look  with  great  misgiving  upon  the  dispersion  of  power 
that  one  holds,  and  to  feel  that  the  foundations  of  things 
have  been  rudely  shaken  and  endangered  if  any  change 
of  the  status  quo  is  threatened.  Autocrats  are  rarely  suf- 
ficiently philosophical  to  appreciate  that  the  rise  in  any 


LABOR  CO-OPERATION 123 

civilization  is  dependent  upon  the  diffusion  of  power  and 
the  greater  freedom  of  the  mass.  Moreover,  it  is  still 
more  inexplicable  to  them  that  this  greater  opportunity 
_.-  .  for  the  exercise  of  individual  initiative  is 

Diffusion  of  .  .  . 

power  n°t  inconsistent  with  but  is  necessary  to  a 

more  efficient  form  of  cooperative  organiza- 
tion. In  so  far  as  the  cooperation  of  the  workers  makes 
the  position  of  the  slave  driver  impossible,  it  is  an  agent 
for  the  increase  of  efficiency  and  the  development  of  social 
fitness. 

industrial         When  we  consider  the  time  that  it  has  taken 
democracy         £0  bring  political  democracy  up  to  its  pres- 
ent imperfect  state,  it  is  readily  seen  that 
an  early  and  complete  democratization  of 
industry  cannot  reasonably  be  expected.     At  best  the 
process  will  be  slow  and  the  evolution  must  take  its  way 
through  the  various  vicisssitudes  incident  to  a  change  so 
fundamental  in  character. 

The  most  difficult  problem  involved  is  the  development 
of  a  spirit  of  accommodation  in  employers  and  employees. 
This  must  be  accomplished  before  there  will  be  any 
chance  to  employ  practicable  methods  for  carrying  out 
democratic  action.  Once  the  proper  psychology  obtains, 
the  methods  and  machinery  for  putting  democracy  into 
practice  will  easily  follow,  in  fact,  cannot  be  prevented. 
The  process  of  preparation  for  the  diffusion  of  democracy 
must  involve  the  recognition  of  a  common  interest  and 
the  equality  of  right  of  both  employers  and  employees. 
So  well  must  this  basis  be  established  that  there  must  be 
on  the  part  of  all  a  fixed  purpose  to  give  unquestionable 
assent  to  majority  decrees,  which  can  only  be  done  when 
there  exists  the  general  conviction  that  mutual  conces- 
sions lead  to  the  equal  protection  of  all. 


124  THE  WAY  OUT 


It  will  always  be  found  futile  to  undertake  the  intro- 
duction of  methods  to  accomplish  the  general  purpose  in 
advance  of  the  existence  of  that  democracy  of  spirit  upon 
which  permanence  must  rest.  It  should  be  remembered 
that  democracy  cannot  be  made  to  order,  and  if  such  an 
attempt  is  made,  it,  like  Locke's  government 
erowth  model,  will  generally  be  found  impractic- 

able. True  democracy  is  a  growth  more 
closely  allied  to  spirit  than  to  matter.  It  can  never  exist 
except  in  cases  where  a  mutual  interest  is  recognized. 

It  has  already  been  shown  that  the  life  of  capitalism 
depends  upon  the  existence  of  class  interests,  and  there- 
fore an  industrial  system  functioning  under  its  principles 
offers  insurmountable  obstacles  to  a  highly  developed 
democracy  between  employers  and  employees.  The  most 
that  can  be  hoped  for  under  this  system  is  a  partially  de- 
veloped democracy  dealing  always  with  those  relations 
between  employers  and  employees  that  involve  well  recog- 
nized common  interests.  In  stating  this  limitation  it  is 
not  intended  to  discourage  the  effort  to  establish  a  com- 
mon bond  between  employers  and  employees,  who  in 
many  respects  are  co-workers,  having  far  more  in  com- 
mon than  has  apparently  so  far  been  appreciated  by 
either. 

Production  is  the  reward  for  labor  and  this  sum  of  ben- 
efits must  be  diminished  to  the  extent  that  return  for  the 
use  of  capital  is  made.  The  owner  in  large  operations 
must  have  more  surplus  capital  to  take  care  of  the  growth 
of  the  business  than  the  savings  from  the  result  of  his 
own  labor  will  furnish,  therefore  this  must  come  out  of 
production  before  the  division  between  the  workers  takes 


LABOR  CO-OPERATION 125 

place.    If  these  deductions  are  not  made  in 

Payment  for       advance  of  the  division  between  the  workers 

c.ap"    they  must  be  provided  for  or  the  business 

ital  prevents  -  ^  ..  . 

full  democratic  cann°t  function  normally.  It  is  obvious  that 
action.  the  workers  under  such  a  system  are  com- 

pelled to  accept  as  compensation,  not  all  that 
they  produce,  as  is  required  by  the  ethical  principle,  but 
only  a  part  of  it.  Under  these  circumstances  there  is 
lacking  that  common  interest  in  the  process  that  must 
exist  as  a  condition  precedent  to  full  democratic  action. 

In  these  fundamentals  of  capitalism  there  cannot  be 
uniformity  and  equality.    Stated  differently,  the  moral 
law  marks  the  limitations  of  democratic  action.    No  ma- 
jority action  is  permissible  if  it  contravenes 

Maioritv  ac  11 

j     j  moral  law.    It  may  be  that  the  workers  in 

tion  not  valid  f ,  r         .,,.  „  .. 

against  moral     some  cases  would  be  willing  to  forego  that 
iaWt  part  of  their  earnings  that  must  be  taken 

under  capitalism  to  pay  for  the  use  of  cap- 
ital and  to  swell  the  surplus  fund  of  the  owner,  but  such 
action  would  be  entirely  too  exceptional  to  be  relied  upon 
as  a  foundation  for  a  permanent  system.  It  would  be 
more  nearly  in  accord  with  human  nature  for  these  de- 
privations of  the  workers  to  remain  a  bone  of  contention, 
a  thorn  in  the  side  of  the  body  politic  that  will  never  be 
remedied  until  the  cause  is  removed. 

It  is  possible  that  capitalists,  owners,  and  workers  in 
particular  industries  may  cooperate  to  the  extent  of  al- 
lowing each  to  get  the  desired  share.    Under 
Combination      thjg  arrangement  each  of  these  three  classes 

against  the  ,.          .,        ,  mi 

public  may  £e^  even  more  than  its  snare.     Ine 

simplest  method  of  accomplishing  the  feat 
is  to  charge  an  increased  price  for  the  product  and  appor- 
tion the  result  between  themselves.  It  has  been  charged 
that  the  coal  mine  owners  and  miners  have  already  done 
it.  This  by  no  means  cures  the  defect  since  it  only  trans- 


126  THE  WAY  OUT 


fers  the  loss  from  the  workers  in  that  particular  field  to 
the  shoulders  of  workers  in  some  other  avenue  of  effort. 
It  is  not  difficult  to  see  that  the  coterie  of  exploiters,  cap- 
italists, owners  and  workers  have  a  common  interest  in 
robbing  the  public  and  doubtless  could  reduce  all  differ- 
ences between  themselves  to  mere  matters  of  expediency 
to  be  decided  by  majority  action.  It  is  only  in  such  cases 
that  one  may  reasonably  expect  anything  more  than  a 
limited  application  of  the  principles  of  democracy  to  cap- 
italistic industry. 

Relative  Acts  of  relative  injustice  are  as  provocative 

injustice  Of  (jiscor(j  as  are  those  of  actual  injustice. 

Pf °rr°(  *  flVC  ^  r°bker  chieftain  who  does  not  divide  the 
booty  fairly  between  his  followers  and  him- 
self will  disrupt  his  organization.  If  the  employer  is 
getting  large  profits,  that  of  itself  will  be  a  cause  of  dif- 
ference between  him  and  his  employees.  He  may  pay 
them  all  that  they  produce  and  even  more  and  yet  they 
will  not  be  satisfied.  So  long  as  they  believe  that  they  are 
not  getting  their  full  share  of  the  exploitation  he  is  prac- 
ticing upon  society,  they,  like  the  horse-leech,  will  ever  be 
crying  for  more  and  more.  They  will  be  deeply  ag- 
grieved, not  because  they  are  denied  justice,  but  because 
they  are  not  permitted  a  larger  share  of  the  unjust  ex- 
action that  the  employer  is  making  upon  the  public.  The 
workers  give  most  trouble  in  times  of  so-called  business 
prosperity  when  the  margin  of  profits  is  high.  It  is  then 
that  organized  workers  are  most  powerful  and  insistent. 

Capital  and  Under  the  conditions  that  usually  prevail 
labor-  cooperation  will  more  likely  develop  along 

class  lines.  The  owners,  capitalists  and  managing  work- 
ers will  constitute  a  class  now  commonly  called  "Capital" 
and  the  workers  will  constitute  another  now  called 


LABOR  CO-OPERATION 127 

"Labor."  These  classes  will  usually  be  found  in  opposi- 
tion rather  than  in  agreement  and  a  spirit 

the  jungle  °^  mutual  distrust  and  belligerency  instead 
of  harmony  will  dominate  both  of  them. 

The  law  of  the  jungle  is  their  code. 

"The  good  old  rule,  the  simple  plan, 
Let  him  take  who  hath  the  power 
And  let  him  keep  who  can," 

best  expresses  the  spirit  governing  the  relations  between 
these  classes.  If  they  cooperate  it  is  under  an  insecure 
truce,  and  when  this  is  no  longer  advisable,  war  results. 
The  essential  elements  of  capitalism  make  this  result  in- 
evitable. There  cannot  be  fair  and  unfair  dealing  at  the 
same  time  in  the  same  transaction.  Injustice  cannot 
reap  where  it  has  not  sown,  keep  what  it  has  wrongfully 
taken  and  then  transmute  itself  into  justice. 

impossible  to  The  ablest  minds  of  all  the  ages  have  spent 

escape  the  their  energies  in  the  effort  to  devise  methods 

effects  of  vio-  fe     wh}ch  ^  exploiter  could  retain  the  m. 

lationof  .                    ....                   ,.       XT 

moral  law  gotten  gams  and  still  escape  the  Nemesis 
that  the  moral  law  sends  after  him  who  vio- 
lates it,  but  all  in  vain.  It  is  an  impossible  task  and  the 
sooner  this  lesson  is  learned,  the  better  for  mankind. 
Justice,  fair  dealing,  and  regard  for  others  are  as  neces- 
sary to  the  growth  of  the  soul  as  bread  is  to  that  of  the 
body.  There  can  be  no  real  progress  in  social  develop- 
ment when  suspicion,  hate,  and  desire  for  reprisal  con- 
trol social  action. 


Justice  the  The  organized  workers  use  their  power 
safe  way.  principally  to  shorten  time  and  increase 
pay,  especially  the  latter.  Regarding  the  former,  it  may 


128  THE  WAY  OUT 


be  said  that  within  certain  bounds  the  employer  is  not 
necessarily  benefitted  by  maintaining  longer  hours  nor 
damaged  by  decreasing  the  hours  of  the  work  day.  There 
is  a  point,  varying  much  in  different  occupations  and  to 
a  less  extent  in  each  individual  worker, 
Maximum  pro-  where  the  workers'  maximum  production 

ductionin  a          «  ,       .  ,     ,        ..  . «  .,      ,.        .       .,, 

'ven  time  a     ^  1S  reac^ed  and  if  the  time  is  either 

lengthened  or  shortened,  an  actual  loss  of 
production  results.  This  maximum  of  production  should 
not  be  understood  to  mean  the  greatest  amount  the 
worker  can  do  for  one  day  but  it  represents  a  higher 
average  rate  of  production  that  can  be  maintained  indefi- 
nitely. This  does  not  exhaust  the  worker 
Exhaustive  but  k  him  physicany  and  intellectually 

work  not  „.         ,  .  ,  ,  . 

economical  "*  an(* insures  that  he  can  maintain  produc- 
tive efficiency  for  a  longer  time.  The  older 
theory  of  rushing  the  worker  to  extreme  effort,  casting 
him  aside  when  exhausted,  is  analogous  to  the  waste  of 
natural  resources  and  leads  inevitably  to  national  pov- 
erty and  decadence.  It  is  economically  unsound  and 
must  tend  to  produce  social  abasement. 

Methods  of  The  methods  adopted  by  the  organized 
organized  workers  to  reach  their  objectives  are  usually 
labor  usually  destructive  in  thejr  nature.  Behind  their 
demands,  though  often  thinly  veiled,  there 
is  usually  the  purpose  to  resort  to  force  if  necessary.  As 
undesirable  as  this  may  be,  it  has  nevertheless  been  of 
great  benefit  not  only  to  the  workers  but  to  society  as 
well.  It  is  easily  conceivable  that  if  the  workers  had  not 
cooperated  to  acquire  power  and  used  it  even  ruthlessly 
and  unjustly  at  times,  the  whole  world  would  to-day  be 
little  in  advance  of  semi-barbarism.  The  knowledge  on 
the  part  of  employers  that  too  little  consideration  for  the 
workers  would  lead  to  organization  and  reprisals  has  no 


LABOR  CO-OPERATION 129 

doubt  done  a  great  deal  in  improving  the  conditions  of 
the  workers  of  all  classes,  and  incidentally  has  been  of 
general  benefit  as  well. 

The  average  worker's  conception  of  a  labor  union  is 
that  it  is  an  instrument  to  be  used  mainly  to  force  em- 
ployers to  pay  higher  wages  and  adopt  a  shorter  work 
day.  These  have  been  the  union's  greatest  achievements, 
and  in  so  far  as  the  hours  of  labor  and  rates  of  pay  were 
reasonable  the  results  have  justified  their  existence. 

It  is  evident  that  conditions  are  better  than  they  would 

likely  have  been  had  there  been  no  labor  organizations. 

Conceding  all  this,  the  fact  remains  that  our 

Industrial  and    industrial  and  commercial  life  is  organized 

and  functioning  on  the  principle  of  force, 

life  functions  ,    ,.        ,.  ,          .  \  ... 

enforce  anc*  ^e  diverse  class  interests  which  are 

principle.  ever  growing  stronger  and  more  clearly  de- 
fined are  constantly  in  a  state  of  defense,  if 
not  actually  engaged  in  offense.  Neither  do  there  appear 
any  encouraging  indications  that  the  trouble  is  abating 
or  that  the  angles  of  difference  are  being  rounded.  On 
the  contrary,  the  divergence  between  these  classes  seems 
to  become  wider  as  time  goes  on. 

The  workers  become  more  and  more  insistent  that  a 

larger  measure  of  what  they  conceive  to  be  justice  shall 

be  accorded  them  and  the  employers  have  constantly  been 

constrained  to  yield  in  this  respect,  with  the 

result  that  the  standard  of  living  of  the 

standard  ,  . ,  m, 

of  living  workers  has  constantly  risen.     These  con- 

cessions have  not  so  far  been,  relatively,  at 
the  cost  of  the  employers,  but  have  come  out  of  the  in- 
crease of  production  which  developed  intelligence  with  its 
improved  methods  and  machinery  has  brought  about. 

The  guiding  spirits  of  capitalism  long  ago  recognized 
that  its  exactions  must  be  met  by  inducing  more  efficient 
production  so  that  the  toll  would  come  out  of  the  excess  of 


130  THE  WAY  OUT 


production  above  what  had  formerly  been  produced,  else 
the  portion  of  the  workers  would  become  perceptibly  di- 
minished. Were  this  diminution  to  take  place,  the  rich 
growing  richer,  and  the  poor  becoming  poorer,  there 
would  come  about  conditions  that  would  lead  to  disrup- 
tion and  eventual  destruction  of  the  present  economic 
system.  They  realized  that  the  most  prom- 
increased  ising  way  out  was  through  increased  pro- 
production  a  f.  J  .  '  .4.  v  • 
protection  to  duction  which  would  permit  capitalism  to 

capitalism.  take  its  tribute,  yet  leave  for  the  workers 
certainly  as  much  and  perhaps  more  than 
had  formerly  been  given  them.  Thus  under  most  fa- 
vorable circumstances  both  classes  might  become  richer 
compared  with  the  former  status.  This  has  actually  re- 
sulted but  has  not  proven  a  cure  since  the  relative  dis- 
tance between  the  richest  and  poorest  is  ever  growing 
greater,  and  the  demands  of  the  workers  for  their  rela- 
tive share  of  the  increased  production  is  becoming  more 
insistent. 

The  struggle      The  struggle  that  aspires  first  for  equality 
to  excel  never  ends.     There  is  ever  present  in  the 

j  i 

human  being  a  well-developed  purpose  to 
level  things  down,  to  make  opportunity  more  nearly 
equal,  but  man  does  not  stop  at  reaching  equality  be- 
cause, this  attained,  he  still  continues  to  strive  to  out- 
distance others.  This  purpose  is  an  expression  of  the 
natural  instinct  to  excel,  and  when  it  can  be  kept  within 
the  limitations  of  moral  law  and  be  employed  as  an  incen- 
tive to  promote  human  prowess,  it  deserves  and  should 
receive  hearty  approval  and  encouragement.  The  work- 
ers, emulating  the  owners,  organize,  then  begins  the 
struggle  for  recognition  and  consideration.  The  more 
they  achieve,  the  stronger  they  become  and  the  more  they 
demand.  They  were  satisfied  in  the  early  stages  with  a 


LABOR  CO-OPERATION 131 

few  pennies  more  than  they  had  formerly  received  but 
their  ideas  of  a  standard  of  living  expanded  always  more 
rapidly  than  the  means  of  affording  it. 

The  owners  have  yielded  ground  steadily,  and  nearer 
and  nearer  are  they  forced  back  to  the  line  of  last  defence, 
that  is  to  say,  the  workers,  as  general  intelligence  is  dif- 
fused and  they  come  under  more  efficient 
leadership,  will   understand  more  clearly 

increased  * 

demands  their  economic  relation  to  the  owners  and 

realize  more  keenly  the  unmoral  foundation 
of  capitalism.  Their  demands  for  wages  and  better 
working  conditions  were  at  first  reformatory  in  their 
nature  but  the  progression  will  not  stop  with  mere  re- 
form. It  will  go  farther  and  become  revolutionary,  de- 
manding that  full  justice  be  done,  that  the  return  on  cap- 
ital be  abolished  or  at  least  reduced  to  its  lowest  possible 
terms,  that  there  shall  be  substituted  for  capitalism  a 
system  that  will  not  require  that  the  surplus  productions 
of  the  many  be  transferred  without  consideration  to  the 
few  owners  of  the  social  machinery,  and  further  that  this 
machinery,  vesting  in  the  few  monopolists  the  power  of 
levying  tribute  upon  society,  shall  belong  to  all  the  people 
to  be  used  for  their  benefit.  Whether  one  agrees  or  dis- 
agrees with  the  one  or  the  other  side  to  the 
controversy,  he  must  indeed  be  dull  of  per- 
fundamentai  ception  who  does  not  see  that  the  time  is 
rapidly  approaching  when  the  struggle  for 
a  deeply  fundamental  industrial  change  will  become  a 
world  problem. 

Thus  far  the  reference  has  mainly  been  to  industrial 
workers  but  they  by  no  means  constitute  either  in  num- 
bers or  in  importance  the  greater  part  of  the  working 


132  THE  WAY  OUT 


rm,     i  v.  class-     From  the  days  of  Aristotle  to  the 

The  plebeian  ,.  J    .    ...     ,,  _      .. 

class  present  time   every   civilization   with   its 

privileged  classes  has  rested  upon  a  plebeian 
class,  a  great  mass  of  ignorant  toilers  who  would  submit 
to  being  made  the  hewers  of  wood  and  the  drawers  of 
water  for  their  masters.  Special  privilege  means  this 
and  nothing  less.  Its  existence  can  do  nothing  less  than 
cause  the  robbery  of  some  class  of  workers  for  the  benefit 
of  the  favored  few. 

As  the  industrial  workers  become  more  powerful 
through  organization  and  succeed  in  increasing  their 
wages,  the  employer  proceeds  to  shift  the  added  burden 
to  the  shoulders  of  some  weaker  class  of  workers,  which 
for  the  nonce  becomes  the  burden  bearer.  Perhaps  no 

classes  have  suffered  more  from  this  cause 

common  Tabor.  than  farmers  and  what  is  usually  called 
common  labor.  It  is  true  that  many  en- 
gaged in  farming,  owning  their  own  lands,  are  them- 
selves exploiters  of  the  poorer  farmers  who  rent  lands 
from  them.  The  great  increase  in  tenancy  proves  that 
this  process  of  exploitation  is  going  on  constantly  and  is 
fast  developing  a  subject  class.  It  can  readily  be  con- 
ceived that,  when  the  exploitation  which  capitalism  in 
organized  industry  imposes  upon  all  farmers  is  supple- 
mented by  the  toll  that  greedy  landlords  impose  on  ten- 
ants, the  latter  have  little  reason  to  expect  much  improve- 
ment in  their  condition. 

Farmers  least  The  farmers,  on  account  of  their  extreme 
social-minded,  individualism  which  in  the  past  has  made  it 
practically  impossible  to  organize  them  in  an  effective 
way,  have  always  been  an  easy  mark.  They  of  all  classes 
are  the  least  socially  minded.  Their  slogan  may  be  differ- 
ent but  their  practice  is  "Each  for  himself  and  the  devil 
take  the  hindmost." 


LABOR  CO-OPERATION 133 

Promotion  of  The  productive  power  of  the  farming  class 
production.  has  j^een  greatly  increased  in  the  last  de- 
cade. As  already  noted,  the  directing  forces  of  capital- 
ism have  recognized  the  imperative  necessity  of  more 
efficient  production.  Through  teaching  more  scientific 
methods  of  cultivation  and  promoting  the  use  of  im- 
proved machinery  they  have  tremendously  increased  the 
sum  of  production.  As  these  better  methods  become  more 
generally  understood  and  applied  it  is  entirely  probable 
that  still  further  increases  will  result. 

This  work  of  education  is  being  done  under  both  public 
and  private  initiative.  The  cooperation  brought  about  by 
the  educational  courses  designed  to  increase  production 
will  also  make  possible  its  use  for  other  purposes  as  well. 
Evidence  of  this  is  already  making  its  appearance  in 
efforts  to  organize  cooperative  enterprises  in  distributive 
work. 

Once  the  farming  class  has  learned  that  it  can  act  to- 
gether, exchange  ideas  and  promote  the  interest  of  all  in 
productive  effort,  it  will  be  only  a  step  to  apply  the  same 
principle  to  protect  itself  from  the  exactions  that  num- 
berless unnecessary  middlemen  have  imposed  upon  it  in 
the  past.     The  cooperative  psychology  is 
now  being  rapidly  developed  among  farmers 

psychology  .  *  J  .  .  .,  ' 

developing  an(*  very  *ar  reachmg  results  may  be  con- 
among  farmers,  fidently  expected.  The  movement  though 
still  in  its  infancy  is  spreading  rapidly. 
Like  all  new  movements  in  the  hands  of  the  inexperi- 
enced, it  will  encounter  its  obstacles,  pitfalls,  and  its 
failures  but  is  certain  to  succeed  in  the  end  to  the  extent 
that  its  limitations  are  not  exceeded.  The  cooperators 
would  do  well  to  consider  that  cooperation  under  private 
initiative  has  its  limitations  and  that  undertakings  that 
overstep  them  are  simply  inviting  disaster. 


134  THE  WAY  OUT 


Cooperative  This  movement  now  concerns  itself  largely 
manufacture.  wjth  distribution,  but  must  later  on  take  up 
manufactures  as  well,  since  the  benefits  of  cooperation 
are  very  problematical  if  they  are  dependent  upon  capi- 
talistic manufacture  with  its  power  to  name  the  initial 
price  for  their  supplies.  The  large  units  of  manufacture 
can  well  afford  to  assist  the  cooperators  to  destroy  small 
manufacturers  and  middlemen  and  eliminate  every  un- 
necessary expense  of  distribution  of  which  they  are  not 
the  beneficiaries,  because  all  that  is  so  saved  but  adds  to 
the  fund  from  which  capital  gets  its  return.  Even  if 
these  savings  were  divided  as  they  to  some  extent  will  be 
between  the  cooperators  and  the  large  manufacturing 
units,  the  latter  can  well  afford  for  the  time  at  least  to 
promote  the  change.  This  development  among  producers 
is  so  far  more  cooperative  in  name  than  in  fact  since 
much  of  it  is  capitalistic  in  form  and  even  more  so  in 
spirit.  The  basic  desire,  or  more  correctly  stated,  greed, 
that  will  not  be  satisfied  with  mere  protec- 
Cooperation  tion  againgt  exploitation  from  others, 

rather  than  prompts  the  imposition  of  all  that  the  bus- 
in  fact.  iness  will  bear,  and  in  so  far  as  this  is  done, 
the  operation  is  not  in  accord  with  the  coop- 
erative principle  but  represents  a  shifting  from  one  class 
of  exploiters  to  another. 


These  efforts,  however,  develop  a  class  spirit  and  con- 
sciousness that  tend  to  keep  all  classes  growing  in  accord 
with  the  class  principle  that  capitalism  introduced.  The 
farmer  and  the  common  laborer  are  simply  following  the 
example  of  those  afforded  special  privileges,  making  of 
themselves  classes  to  conform  to  the  class  environment 
which  capitalism  has  created.  Capitalism  must  have  a 
subject  class  or  perish. 


LABOR  CO-OPERATION 135 

The  ever  increasing  lobby  at  the  center  of  government, 
representing  everv  class  known  to  exist  in 

Class  privilege  .   ,    f.  „         "  .  .    .  ,.  ., 

bearing  fruit  our  socia*  h*6*  makes  plain  that  the  evil 
seeds  of  class  privilege  have  brought  forth 
an  abundant  crop.  Should  the  subject  classes  develop 
sufficient  power  to  secure  immunity  from  exploitation  it 
must  inevitably  result  in  the  destruction  of  the  present 
economic  and  industrial  system  in  large  production, 
transportation,  and  transmission.  When  the  workers 
demand  justice  it  means  that  they  are  asking  that  cap- 
italism be  displaced.  It  means  that  they  insist  that  the 
opportunity  of  any  to  take  more  than  their  fair  share 
based  upon  their  contribution  of  effort  shall  be  forever 
made  impossible.  It  not  only  means  that  the  rich  shall  be 
denied  opportunity  to  prey  upon  the  poor  but  also  that 
the  latter,  too,  shall  be  denied  the  chance  to  get  anything 
more  than  that  which  they  may  earn  by  honest,  efficient 
work. 


Development      It  is  obvious  that  the  equal  development  of 
of  class  au  c|ass  interests  must  lead  to  the  destruc- 

tion of  special  privilege  and  the  substitution 
destruction.  of  some  system  that  will  be  able  to  function 
in  accord  with  the  democratic  principle  of 
equal  rights  to  all  and  special  privileges  to  none.  The 
hope  is  that  these  conflicting  class  interests,  capitalists 
of  all  kinds  and  workers  of  every  description,  by  their 
greedy  demands  and  disregard  of  the  general  interest 
may  finally  convince  a  majority  of  the  people  that  no  class 
is  to  be  trusted,  and  that  class  government  by  whatsoever 
class  is  an  intolerable  tyranny  negativing  every  principle 
of  democratic  freedom  and  fairness. 


136  THE  WAY  OUT 


Man  learns  It  is  entirely  probable  that  the  evolution  had 
little  except  t0  proceed  along  class  lines,  for  man  learns 
fr01*  little  except  from  his  mistakes,  and  even  by 

mistakes.  ,,  j-i      i  i  •  •,,,      /. 

that  method  he  requires  a  wealth  of  example 
that  does  little  credit  to  his  intelligence.  This  class  co- 
operation is  making  tremendous  strides.  It  is  marshal- 
ling the  forces  for  a  mighty  contest  in  the  near  future 
that  will  shake  the  foundations  of  the  existing  social 
order.  What  have  hitherto  been  regarded  as  epochal 
events  will  be  insignificant  in  comparison  with  those  that 
are  impending.  Decent  regard  for  the  public  welfare  as 
well  as  intelligent  self-interest  will  suggest  to  everyone 
the  importance  of  shaping  public  policies  so  that  these 
mighty  changes  may  be  effected  with  the  greatest  good 
at  the  least  possible  expense.  Mankind  is  being  chal- 
lenged to  show  its  fitness  to  go  onward  and  upward.  May 
it  stand  the  crucial  test. 


CHAPTER  VIII. 

THE  TREND  TOWARD  MONOPOLY. 

Progress  The  progress  of  social  development  depends 

depends  upon  the  elimination  of  the  unnecessary, 

upon  the  Waste   and   inefficiency   are   its   greatest 

elimination  ,         ,       ,  .  •     n      •  •   i 

of  the  drawbacks.  It  is  economically  immaterial 

unnecessary,  whether  these  result  from  improvident  use 

of  production,  the  inefficiency  of  the  work- 
ers, or  from  the  lack  of  proper  organization.  The  effect 
in  either  case  is  the  same.  Society  suffers  a  loss  to  the 
extent  that  either  waste,  inefficiency,  or  useless  duplica- 
tion of  effort  exists.  The  magnitude  of  this  loss  can 
hardly  be  appreciated.  If  reasonable  use,  efficient  work, 

and  effective  organization  were  the  rule,  it 

Better  organ-       -g  probable  that  a  fourth  of  the  working 
ization  of  i   j-  IT  j    i    •      ji     • 

labor  population  would  not  be  needed  in  their 

present  occupations.  With  better  social  ad- 
justment they  could  be  employed  elsewhere  more  advan- 
tageously both  for  themselves  and  for  society. 

Waste  by          The  waste  resulting  from  the  unnecessary 
duplication        duplication  of  labor  is  a  tax  upon  useful 

workers  in  that  those  so  employed  are  con- 
cause  Of  ,  .  ,  «  1  1  -j_T  •  • 

poverty  summg  the  products  of  labor  without  giving 

adequate  return  therefor.  When  one  con- 
templates this  vast  amount  of  wasted  energy,  he  ceases  to 
be  surprised  that  the  poor  are  so  numerous  or  that  their 
standard  of  living  is  so  low.  With  this  army  of  social 
parasites  usefully  employed,  the  production  of  wealth 
would  be  greatly  accelerated,  making  possible  the  eleva- 
tion of  the  standard  of  living  to  a  point  never  before 
reached. 


137 


138  THE  WAY  OUT 


The  law  of  The  law  of  being  is  effective  labor.  This 
being.  jaw  demands  that  nothing  be  lost.  To  live 

in  accord  with  it  the  highest  possible  degree  of  conserva- 
tion of  energy  must  be  attained.  From  this  law  man  de- 
rives authority  to  adopt  any  method  not  inconsistent  with 
the  ethical  principle  that  tends  to  bring  the  social  process 
into  accord  with  the  requirements  of  efficiency.  When 
wiser  use  or  improved  method  makes  the  employment  of 
workers  unnecessary  in  a  particular  sphere,  it  becomes 
a  social  duty  to  transfer  them  to  some  other  more  useful 
work.  A  multitude  of  little  shops  might  be  displaced  by 
one  large  distributing  house  that  could  with  far  fewer 
workers  do  the  public  service  more  efficiently  at  greatly 
reduced  cost. 

Reduction  in      Many  small  factories  poorly  equipped  might 
number  of         with  great  profit  be  superceded  by  a  large 
St  organization  with  the  best  available  equip- 

ment, enabling  it  to  furnish  the  goods  more  economically 
and  more  satisfactorily.  This  process  should  apply  so 
long  as  larger  volume  produces  an  economic  saving.  To 
get  the  full  social  effect  of  this  better  method,  the  savings 
effected  must  be  liberally  shared  with  the  buying  public 
in  the  form  of  lower  prices.  As  a  matter  of  history,  this 
is  exactly  what  has  happened  in  the  economic  evolution. 

Primitive  The  provisions  for  meeting  public  needs  ad- 
methods.  just  themselves  to  the  existing  environment. 
When  there  were  no  means  of  transporting  products  or 
transmitting  ideas  long  distances,  each  little  neighbor- 
hood was  a  world  in  itself.  Here  the  old  woman  with  her 
loom  manufactured  the  fabrics,  the  blacksmith  made 
nails,  or  in  his  absence  people  used  wooden  pegs  for  nails, 
the  wheelwright  made  crude  wagons  and  carts,  the 
women  pounded  the  corn  on  flat  stones,  as  there  were  no 


THE  TREND  TOWARD  MONOPOLY 139 

mills  to  grind  it,  and  men  fashioned  their  rude  imple- 
ments and  weapons  with  their  own  hands.  Time  passed, 
development  took  place  and  communication,  rarely  at 
first,  but  with  increasing  frequency,  occurred  between 

this  small  locality  and  the  nearest  neighbor; 

the  borders  of  both  widened  until  they  met, 

the  common         „         .  ,  ' 

interest  forming  a  larger  community ;  the  means  of 

communication  kept  pace  in  the  march  of 
progressive  development,  and  it  became  possible  to  ex- 
change products  over  a  greatly  extended  area  in  the  same 
time  and  with  even  greater  facility  than  formerly  could 
have  been  done  in  the  smaller  district.  This  necessarily 
increased  demand  for  manufactured  pro- 

The  course  of        ,  1,111  ,    i 

evolution  ducts,  and  the  old  woman  s  loom  gave  place 
to  the  cloth  mill,  the  blacksmith's  trade  was 
taken  over  by  a  nail  mill,  and  the  water  or  steam  driven 
mill  ground  the  grain.  The  porter  gave  place  to  the  pack 
mule,  which  in  turn  was  succeeded  by  the  team  and 
wagon  that  yielded  to  the  railroad  and  canal.  The  faster 
the  transportation,  the  more  nearly  instantaneous  the 
transmission  of  thought,  the  larger  the  community  be- 
came ;  the  more  extensive  the  community,  the  greater  the 
variety  of  wants,  and  the  greater  the  facilities  required 
to  supply  them,  hence  the  larger  factory  superceded  the 
smaller. 

The  more  Thus  went  the  course  of  evolution  in  social 

development  with  its  constant  readjustment 
of  means  to  ends.    It  may  be  noted,  too,  that 

less  efficient.         ..  /.      ,  .   ,  -,  •         i  ^ 

the  advent  of  a  higher  order  occasioned  the 
displacement  and  destruction  of  the  lower,  hence  the  more 
perfect  system  must  rest  upon  the  crushed  remains  of  the 
less  perfect  which  preceded  it.  This  process  by  which  the 
more  efficient  supplants  the  less  efficient  is  ever  present 
and  operating  in  an  ascending  civilization.  The  peddler 


140  THE  WAY  OUT 


gives  way  before  the  small  store  that  in  turn  is  super- 
ceded  by  the  department  store,  because  the  larger  opera- 
tion, on  account  of  augmented  volume,  lowers  the  percent- 
age of  expense  and  can  thus  confer  a  greater  benefit  upon 
the  public.  It  is  this  economy  that  makes  the  evolution 
possible. 

Selfish  The  principle  of  self-interest  prompts  better 

incentive.  organization,  enabling  the  owners  of  the 
social  instrument  to  use  it  for  their  gain,  and  society  wel- 
comes the  improvement  because  the  saving  effected  must 
be  divided  with  it.  There  is  little  altruism  in  economics. 
Man  gives  his  sympathy  to  the  vanquished  but  reserves 
his  support  for  the  victor,  and  he  can  always  be  relied 
upon  to  be  true  to  that  which  he  may  conceive  to  be  to  his 
advantage.  It  is  out  of  this  self-interest,  often  degene- 
rated into  unmoral  and  even  immoral  selfishness,  that 
the  improvements  of  social  organization  have  come. 

From  the  simplest  to  the  most  complex  social  relation 
there  will  be  found  a  common  interest  existing  that  holds 
the  social  body  together  and  causes  it  to  function,  strange 
to  say,  in  accord  with  individual  self-interest.  Mutual 
effort  for  mutual  benefit  is  by  no  means  sacrificial,  but 
fully  in  accord  with  that  intelligent,  sublimated  self- 
interest  that  many  mistake  for  altruism.  This  principle 
encourages  the  selective  process  that  eliminates  the  less 
efficient,  hence,  when  better  service  becomes  attainable  it 
is  gladly  accepted. 

In  order  to  live,  an  organization  must  possess  superi- 
ority both  in  effecting  economic  savings  and  in  distribu- 
ting them.  This  greater  power  of  effecting  savings  de- 
pends largely  on  efficient  organization  and  the  ability  to 
acquire  at  least  economic  cost  the  things  necessary  to  pro- 
duce results.  These  social  improvements  have  usually 


THE  TREND  TOWARD  MONOPOLY 141 

resulted  from  two  principal  causes,  necessity  and  the 
power  of  invention.  The  former  furnishes  the  stimulus 
and  the  latter  seeks  to  devise  means  to  ends.  Each  step 
in  progress  creates  a  new  need  and  the  inventive  faculty 
of  man  is  challenged  to  meet  it.  The  power  to  organize 
may  properly  be  said  to  belong  to  the  inventive  faculty. 
Industrial  organization  has  developed  in  America  more 
rapidly  than  in  any  other  country,  due  largely  to  its 
wealth  of  raw  material  and  to  the  protective  tariff  policy 
of  the  government,  inaugurated  something  more  than  a 
half  century  ago.  It  is  here  that  the  units  of  production 
are  largest  and  here,  too,  they  have  more  nearly  reached 
a  state  of  private  monopoly. 

Material  It  is  unfortunately  true  that  material  de- 

precedes  moral  velopment  comes  first  and  the  establishment 
leveiopment.  of  moral  limitations  comes  afterward.  The 

invasion  of  a  newly  discovered  country  takes  place  and 
the  pioneers  throw  off  restraint.  Their  regard  for  law 
and  reverence  for  moral  restraint  disappear  before  the 
rapid  reversion  to  primitive  instincts.  They  react  with 
great  promptness  to  their  wild  environment.  It  is  only 
after  the  period  of  discovery  and  exploitation  begins  to 
approach  its  culmination  that  the  settlers  seriously  con- 
template the  inauguration  of  a  reign  of  law  and  order. 
So  long  as  they  find  unrestricted  opportunity  to  exploit, 
they  show  little  inclination  to  moralize. 

Chaos  precedes     ._,,  .  . ,          ,       , .         ,    ,         . ,  -, 

order  Thls    apparently    chaotic    state,    through 

which  all  new  developments  must  come  in 
the  march  toward  higher  and  better  things,  is  not  without 
real  advantage.  It  tears  out  and  levels  obstructions  pre- 
paratory to  the  introduction  of  more  orderly  methods.  It 
offers  opportunity  for  experience  from  which  some  at 
least  will  extract  wisdom. 


142  THE  WAY  OUT 


Greed  and  lust  The  growth  of  business  organization  offers 
for  power  no  exception  to  the  rule  just  stated.  Its 
driving  pathway  up  from  the  depths  is  strewn  with 

the  carcasses  of  the  weaker  things  that  it 
has  ruthlessly  crushed  and  cast  aside.  Greed  for  gain 
and  lust  for  power  have  been  the  impelling  forces  that 
have  driven  men  forward.  They  have  labored  better 
than  they  knew.  Their  cold  and  often  cruel  selfishness, 
their  lack  of  moral  perception  and  even  their  violations 
of  moral  law,  despite  law  and  knowledge,  have  all  been 
overruled  for  the  public  good.  These  evil  forces,  often 

blind  servitors  of  a  beneficent  providence, 

Evil  overruled  ,.  ,     .  ,f\  ,. 

for      d  continue   to   bring   about   conditions   that 

compel  closer  cooperation  and  better  social 
organization. 

In  this  way  the  march  toward  monopoly  is  kept  up. 
Those  most  responsible  for  this  development  are  least 
willing  to  accept  the  inevitable  results  of  it.  They  con- 
tinue to  strive  with  might  and  main  to  construct  social 
machinery  which  they  vainly  hoped  to  appropriate  to 
themselves.  It  is  scarcely  just  to  judge  the  acts  of  either 
individuals  or  classes  except  by  contemporary  standards. 
Each  period  has  its  own  ethical  standard. 
Each  period  ^  social  cooperation  becomes  more  highly 

has  its  own  .        ,         ..    . .  J  .  ..       ..  °. 

standards  developed  the  moral  standard  rises.  His- 
tory is  replete  with  instances  of  men  who 
were  eminently  successful  according  to  the  accepted 
standards  of  their  times,  who  at  a  later  period  for  the 
same  acts  would  easily  have  been  put  in  penal  institu- 
tions. 

Industrial,  commercial,  and  financial  evolution  has 
gone  forward,  not  in  accord  with  moral  law,  but  in  large 
measure  against  it.  The  social  sin  of  omission  committed 
originally  by  the  public  in  its  failure  to  devise  proper 


_  THE  TREND  TOWARD  MONOPOLY  _  143 

machinery  for  its  own  service  made  the  unmoral  and 
often  immoral  substitute  system  necessary. 

Capitalism,  dependent  for  its  existence  upon  special 

privileges  that  must  exploit  others,  has  developed  an  in- 

ordinate greed  for  gain  and  lust  for  power 

Mama  for  _  .  .     .  .     .  *       •    j 

•n  which  have  superinduced  a  state  of  mind 

closely  resembling  mania.  This  obsession 
not  only  affects  those  who  succeed  in  amassing  wealth 
and  in  acquiring  great  power,  but  extends  its  baneful  in- 
fluences down  to  the  lowest  elements  of  society.  It  makes 
a  false  standard  that  is  generally  accepted,  under  which 
the  mere  possession  of  wealth  becomes  the  token  of  high 
achievement.  The  ambitious  and  strong  go  forth  to  get 
it,  and  often  are  more  or  less  indifferent  to  methods  or 
morals  if  they  make  the  task  of  accomplishing  the  desired 
result  more  difficult.  The  weaker,  the  despoiled  classes, 
instead  of  condemning  the  wrongs  of  which  they  are  the 
victims,  are  more  likely  to  be  filled  with  envy  because 
they  are  not  able  themselves  to  become  successful  exploit- 
ers. They  look  with  open-mouthed  astonishment  and  ad- 
miration upon  the  successful  looters  who  within  the  pale 
of  the  law  may  succeed  in  filching  millions  from  others 
less  astute  intellectually,  but  perhaps  quite  as  obtuse 
morally  as  themselves.  This  conscienceless 

The  game  of  „          .     .  ,.  ,.  « 

game  of  grab  insures  the  introduction  of 


class  interests  and  introduces  a  state  of  war 
between  them.  Each  strives  to  master  the  other,  and  as 
is  usual  in  war,  all  seek  to  organize  their  followers  into 
effective  fighting  forces. 


Those  owning  and  managing  the  social  machinery, 
recognizing  the  common  interest  between  them,  continue 
to  get  into  closer  cooperation  and  through  destruction 


144  THE  WAY  OUT 


and  absorption  are  rapidly  bringing  all 
these  instrumentalities  into  harmonious  re- 
monopolies,  lation.  This  compels  the  workers  to  organ- 
ize as  a  defensive  measure,  and  once  they 
have  become  sufficiently  strong,  they  proceed  to  demand 
a  share  of  the  spoils  that  monopolistic  enterprise  may  be 
able  to  seize.  There  appears  to  be  little,  if  any  difference 
in  principle  between  the  monopolistic  owners  and  the 
equally  monopolistic  labor  organizations.  They  both  are 
out  for  prey.  They  hunt  successfully  together  and  it  is 
only  after  the  game  is  killed  that  they  engage  in  the  di- 
version of  fighting  over  the  results  of  the  chase. 

These  elements,  the  owners  of  industry  and  the  indus- 
trial workers  and  their  allies,  find  their  easiest  accom- 
modation  in  preying  upon  the  primary  pro- 
Queers,  who  of  all  classes  are  least  organ- 
producers.  *ze(*>  but  even  they  who  in  all  past  ages  have 
been  most  imposed  upon,  now  show  signs  of 
restiveness.  They  are  rapidly  developing  a  class  con- 
sciousness and  a  spirit  of  resistance  against  being  made 
the  burden  bearers  of  civilization. 

This  rapid  growth  of  class  interests  and  the  closer  or- 
ganization and  cooperation  that  it  compels  is  something 
new  under  the  sun.     History  records  no  parallel  to  it. 
That  there  have  been  class  interests  in  all  past  civiliza- 
tions is  true,  but  never  before  were  they  so  general  or  so 
inclusive.    These  various  classes,  though  bitterly  antago- 
nistic, are  in  a  broader  sense  getting  mankind  closer  to- 
gether, humanizing  and  socializing  it.    Sor- 
did selfishness  is  doing  the  splendid  work  of 

digging  its 

own  grave  preparation  that  must  precede  that  more 
perfect  organization  which  will  destroy  all 
class  interests  by  the  elimination  of  special  privilege. 
This  class  war  or  armed  truce  is  bringing  mankind  into 
an  organized  state.  It  is  compelling,  as  nothing  has  ever 


THE  TREND  TOWARD  MONOPOLY 145 

done  before,  conformity  to  the  principle  of  leadership, 
without  which  cooperation  is  impossible. 

Leadership  This  process  of  democratization  rests  its 
essential.  hope  of  ultimate  success,  not  as  many  sup- 

pose, upon  the  elimination  of  leaders,  but  upon  the  devel- 
opment of  the  ability  of  the  mass  to  choose  them  wisely 
and  to  limit  their  opportunities  to  abuse  their  powers. 
Under  this  conception,  the  greatest  leader  becomes  the 
servant  of  all.  The  constant  effort  of  all  classes  is  to  elim- 
inate the  unjust  autocrat  and  to  substitute  someone  else 
who  will  serve  more  unselfishly. 

Class  interests  This  unprecedented  growth  of  class  inter- 
tend  toward  es^s,  as  paradoxical  as  it  may  appear,  is  in 
reality  a  long  stride  forward  in  the  direc- 
tion of  democracy.  The  class  development  is  the  opposite 
of  democracy.  It  denies  the  existence  between  the  classes 
of  that  common  interest  upon  which  all  democratic  action 
depends,  but  at  the  same  time  it  does  establish  beyond 
question  that  within  the  class  there  is  a  common  bond, 
a  mutual  interest,  and  that  class  efficiency  depends  upon 
faithful  recognition  of  interdependence. 

Learning  in  short,  class  interests  are  compelling  men 

democracy  ^0  jearn  the  lessons  of  democracy  in  di- 
visions, and  when  they  become  sufficiently 
developed  to  perceive  the  extent  of  their  mutuality  of  in- 
terest they  will  have  been  sufficiently  trained  to  apply 
the  doctrine  in  a  larger  way. 

The  lesser  must  precede  and  disappear  before  the 
greater.  The  owners  and  managers  have  been  constantly 
extending  their  spheres  of  influence  and  power.  The 
units  of  operation  have  steadily  grown  larger  and  more 
efficient  until  in  many  lines  practical  monopoly  exists. 


10 


146  THE  WAY  OUT 


These  developments  have  driven  the  workers  in  all  lines 
to  organize  in  self-defense.  That  still  greater  concentra- 
tion and  organization  will  take  place  is  not  to  be  doubted. 
The  day  of  little  things  has  gone,  never  to  return. 

Three  stages       There  are  three  principal  stages  in  this  eco- 

of  economic       nomic  development : 

development. 

First,  general  opposition  to  concentration; 

Second,  attempt  to  regulate  it; 

Third,  an  acceptance  of  the  principle  and  the  effort  to 
apply  it  in  the  most  beneficial  way. 

When  the  larger  units  of  production,  distribution  and 

commerce  first  began  to  appear  and  displace  the  smaller, 

it  aroused  in  the  public  a  spirit  of  oppo- 

Stageof  ...  ju      j       !•*•'    i  •  fi~ 

opposition  sition  that  found  political  expression  in  the 
slogan,  "Bust  the  trust."  Stringent  and 
drastic  laws  were  enacted  forbidding  all  combinations  in 
restraint  of  trade,  but  the  trusts  and  monopolies  con- 
tinued to  grow  under  them  as  they  had  never  grown  be- 
fore. 

stage  of  Later  the  courts  were  called  upon  to  enforce 

regulation.  these  laws  and  they  actually  decreed  the  dis- 
solution of  a  few  of  the  largest,  but  the  method  of  dissolu- 
tion, if  it  may  be  so-called,  left  them  even  more  secure  in 
their  monopolistic  powers  than  before.  In  fact,  their 
shares  after  dissolution  became  more  valuable  than  ever. 
The  courts  could  not  tear  down  the  improved  methods 
without  producing  a  very  chaotic  economic  and  industrial 
condition.  Of  necessity,  they  were  compelled  to  go 
around  the  stump  rather  than  through  it  as  the  letter  of 
the  law  required. 


THE  TREND  TOWARD  MONOPOLY 147 

Never  was  there  a  more  convincing  illustration  of  the 
futility  of  enacting  laws  that  had  for  their  purpose  the 
arresting  of  the  march  of  economic  progress.  The  courts 
under  these  laws  were  called  upon  to  turn  the  hands  of 
the  clock  backward,  to  cause  civilization  to  decline,  and  to 
destroy  the  effects  coming  out  of  a  more 

The  courts  .  .   .  ,  * .       ,         .      .     _  _  .        , .     . 

powerless  highly  developed  mind-force,  a  task  entirely 
beyond  them.  Had  they  construed  the  laws 
as  they  were  written,  the  results  would  have  been  so  dis- 
astrous that  they  would  doubtless  have  led  to  the  hasty 
amendment  if  not  repeal  of  them,  but  such  decisions 
would  likely  have  produced  serious  industrial  and  com- 
mercial disturbances  that  might  possibly  have  shaken  the 
foundations  of  the  government.  It  seems  to  have  been  a 
case  in  which  the  courts  were  left  the  alternative  of  choos- 
ing that  which  they  might  consider  the  lesser  of  two  evils. 

The  country  for  some  time  has  been  passing  out  of  the 
first  phase  into  that  of  a  belief  in  and  an  attempt  to  reg- 
ulate the  larger  units.    The  public  mind  has  come  to  rec- 
ognize the  economic  superiority  of  these 
large  aggregations  and  to  appreciate  their 

production  *,  .  *\  .  T 

beneficial  ability  to  render  more  efficient  service.  It 
realizes  now  as  never  before  that  the  effect 
of  more  efficient  organization  with  its  better  methods  is 
to  make  possible  a  standard  of  living  that  would  other- 
wise be  impossible. 

No  reasonable  and  fair  mind  will  doubt  that  with  all 
its  faults  and  even  crimes,  large  unit  production  in  a  ma- 
terial sense  has  been  productive  of  great  benefit,  not  only 
to  the  rich  but  to  the  poor  as  well.  The  distance  between 
them  measured  in  wealth  is  no  doubt  greater  than  ever 
before,  but  it  is  quite  as  true  that  all  have  more  now  than 
they  ever  had  at  any  previous  time. 


: 


148  THE  WAY  OUT 


Change  of  Nothing  more  striking  has  occurred  to  illus- 
pubhc  trate  the  change  of  public  opinion  regarding 

opinion.  monopolistic  development  than  the  argu- 

ment lately  advanced  in  certain  high  regulatory  official 
quarters  that  one  of  the  causes  of  delay  in  getting  the 
cost  of  living  reduced  is  the  consideration  shown  smaller 
and  less  efficient  factors  by  the  larger,  thus  preserving 
the  existence  of  these  weaker  elements  at  the  cost  of  the 
public.  Surely  there  must  have  been  a  marked  change 
in  public  psychology  when  the  official  class  begins  to  ex- 
press such  views.  The  effort  to  break  down 
he  public  iarge  unit  production  has  utterly  failed.  It 
relies  on  i  j  i  i  111 

regulation         would  have  been  an  unpardonable  crime 

against  civilization  if  this  destructive  policy 

had  prevailed.    In  the  degree  that  this  development  has 

progressed,  the  public  has  become  convinced  that  these 

operations  must  be  brought  more  nearly  in  accord  with 

the  service  principle,  and  to  effect  this  object  it  has  been 

increasingly  insistent  that  they  should  be  brought  under 

government  regulation.    The  longer  this  experiment  is 

tried,  the  more  apparent  the  fact  becomes 

Doomed  to  dis-     , ,         , ,  ,  , ,  .          , . 

appointment.       that  th°Se  wh°   rel^   UP°n   thlS   V°llW   are 

doomed  to  the  same  disappointment  experi- 
enced by  the  advocates  of  destruction  as  a  remedy  for 
trusts. 

Efficient  In  the  first  place,  if  government  regulation 

regulation         were  attempted  on  a  scale  and  to  an  extent 

impracticable.     ^^  wouW  offer  grounds  for  even  a  hope 

that  it  would  be  effective,  the  tremendous  complexity  of 
it  would  make  it  utterly  impracticable.  Such  an  attempt 
would  result  in  the  establishment  of  a  bureaucratic  in- 
terference with  business  that  would  make  the  country  at- 
tempting it  the  laughing  stock  of  the  rest  of  the  world. 
Busines  could  not  function  under  such  a  system.  Better 


THE  TREND  TOWARD  MONOPOLY 149 

by  far  adopt  the  laissez  faire  method,  leav- 
Laissez  faire  ing  ev^s  to  develop  inordinately  and  destroy 
preferable  to  themselves.  In  a  practical  way  what  would 
attempted  happen  under  a  proposed  government  regu- 
reguiation.  lation  policy  would  be  that  the  trusts  and 

monopolies  would  regulate  the  government 
instead  of  the  government  regulating  them.  Even  now 
there  are  many  indications  that  this  very  thing  is  getting 
under  way  and  has  already  assumed  proportions  and  is 
wielding  influence  far  greater  than  the  masses  have  con- 
ceived. 

The  source  of     He  is  little  informed  who  supposes  that  the 
power.  national  and  state  capitals  are  the  sources 

of  power.  They  are  but  the  exponents  of  that  sovereignty 
that  theoretically  should  reside  in  the  whole  people.  It 
is  just  here,  however,  that  theory  and  fact  part  company 
and  are  daily  getting  farther  apart.  The  real  sovereign 
is  that  part  of  the  people  which  is  most  active,  which  can 
exert  most  influence.  This  cannot  be  ascertained  by 
counting  noses.  In  fact,  this  controlling  and  often  un- 
seen force  is  vested  in  the  very  few  who 

Government  by  .  .          -  .  Vf 

the  few  possess  the  wealth  and  control  the  avenues 

of  public  information,  the  currency  and 
credit  of  the  country  and  the  instrumentalities  of  produc- 
tion, transportation,  and  transmission.  These  few  are 
they  who  outline  the  public  policies  and  see  to  it  that  the 
representatives  support  them.  It  is  not  intended  to  say 
that  this  result  is  accomplished  by  corrupt  or  even  unlaw- 
ful methods,  using  these  terms  in  the  usually  accepted 
sense.  The  methods  as  a  rule  are  more  refined.  It  is 
effected  by  the  exercise  of  financial  and  economic  power. 
To  be  more  concrete,  the  relatively  small  numbers  func- 
tioning through  compact  organizations,  such  as  a  Na- 


150  THE  WAY  OUT 


tional  Chamber  of  Commerce  and  its  associated  bodies, 
or  a  national  labor  organization  and  its  local  branches, 
would  wield  more  influence  in  government  than  all  the 
rest  of  the  people.  These  and  similar  interests  are  or- 
ganized both  for  defense  and  offense.  Not 
The  few  Qnj  can  ^  reward  their  friends  and  pun- 

reward  friends    .  ,    .,    .  •-,,-,  •,  i  i 

and  punish        1S^  ^eir  enemies>  but  they  are  able  to  clas- 
enemies.  sify  them  with  far  greater  precision  than 

the  unwieldy,  disorganized  masses  can  ever 
do.  The  latter,  like  the  mad  elephant,  when  aroused  de- 
velop a  mob  fury  that  is  impartially  dispensed  to  friends 
and  foes  alike.  In  fact,  it  is  more  likely  that  the  astute 
leaders  of  their  enemies  by  lying  propaganda  and  art- 
fully conceived  demagogic  appeals  may  cause  the  disor- 
ganized and  uninformed  to  vent  their  wrath  upon  their 
real  friends.  The  smaller  numbers,  thor- 
Closely  oughly  organized,  know  what  they  want  and 

how  to  get  it,  while  the  widely  scattered  mil- 
versus  the  lions  with  no  definite  objective,  without  in- 
scattered  telligent  leadership,  blunder  along  from  one 
masses.  pitfall  to  another. 

For  the  present  at  least,  the  safety  of  the  existing  order 
depends  upon  feeding  the  multitude.     Better  organiza- 
tion, improved  method  and  the  use  of  ma- 
chinery have  so  far  made  this  possible,  and 

orde^demands     S0  IonS  as  the  standard  of  living  IS  being 

that  the  mul-  raised,  exploitation  may  with  some  degree 
titudebefed.  of  confidence  be  continued,  but  when  once 
the  tide  turns,  and  the  masses  from  what- 
ever cause  must  submit  to  serious  deprivations  in  this  re- 
spect, the  danger  signals  will  automatically  make  their 
appearance. 


THE  TREND  TOWARD  MONOPOLY 151 

Hope  in  The  case,  however,  is  not  so  hopeless  as  the 

education.         foregoing  may  lead  the  pessimistically  in- 
clined to  believe.    General  education  is  being  promoted. 
The  spirit  of  cooperation  is  rapidly  developing  and  the 
ups  and  downs  of  the  masses  are  the  meth- 

Expenence  ,     .       ,          ,       ,     -  .  ,  .        ., 

the  teacher  0(*s  in  ™e  sc^00^  °*  experience,  teaching  the 
people  knowledge  and  enabling  them  to 
learn  wisdom.  They  are  wandering  in  the  wilderness 
from  which,  when  they  are  properly  prepared,  they  will 
emerge  into  a  happier  land  which  they  are  not  yet  quali- 
fied to  enter. 

Private  Private  monopoly  grows  apace.    It  is  doing 

monopoly          a  splendid  work  in  getting  the  social  ma- 
chinery in  order,  but  it  has  its  fatal  defects 
that  will  finally  prove  its  insufficiency  and 
cause  its  displacement.    It  will  demonstrate  through  its 
blind  selfishness  that  it  cannot  be  controlled.    It  will  act 
its  part  upon  the  stage  of  world  evolution  and  pass  as 
other  things  before  it  have  done  to  its  final  reward.    It 
at  best  can  only  be  regarded  as  a  stage  in 
Only  a  stage       human  progress,  a  thing  that  served  its  time 

inhuman  i "   j-  i     i     /.  ^  T 

pro      s  and    disappeared    before    the    succeeding 

order,  which  will  mark  another  step  upward 
in  human  progress.  The  coming  order  awaits  the  devel- 
opment of  a  proper  psychology.  Man  moves  under  the 
urge  of  necessity  and  as  this  develops  he  too  often,  like 
Lot's  wife,  looks  behind,  but  is  pushed  along  by  circum- 
stances that  he  cannot  control.  He  has  no  option  but  to 
adapt  himself  to  his  environment.  He  may  choose  to  a 
greater  or  less  extent  the  path  he  travels,  but  choose  as 
he  may,  they  all  lead  to  the  same  goal. 


CHAPTER  IX. 

THE  INDIVIDUAL  IN  CO-OPERATION. 

Effects  of  Conceding  the  economic  advantage  of  better 
organization  organization  and  closer  cooperation  it  is  per- 
iiponthe  tinent  to  inquire  into  the  effects  that  they 

individual.  .,,   ,  _       .,..,,,.  ^  ** 

will  have  upon  the  individual  being.  So- 
ciety is  not  as  some  suppose,  a  conglomerate  mass  ground 
out  by  nature  as  men  grind  sausage,  but  a  body  composed 
of  live,  sentient  members.  Each  is  a  separate  entity  hav- 
ing characteristics  peculiarly  its  own,  constituting  indi- 
viduality. Man  is  no  exception  to  the  law  of  nature  that 
71.  requires  that  of  all  the  leaves  upon  all  the 

,  Diversity  the  ,     .  -  TT        i      j      • 

rule.  trees,  no  two  shall  be  alike.    He  who  devises 

a  system  failing  to  take  this  basic  fact  into 
consideration  invites  disaster.  The  assumption  that  all 
men  are  alike  and  can  be  jumbled  into  an  indistinguish- 
able mass  is  false  and  the  structure  resting  upon  so  un- 
certain and  unsound  foundation  must  inevitably  fall. 

Principles  Individuality  must  be  given  full  sway,  but 
invariable,  this  by  no  means  excludes  the  recognition  of 
methods  an(j  conformity  to  principles  on  the  part  of 

deVlOUS.  ,  i      n        T-k    •        •     i  mi 

each  and  all.  Principles  never  vary.  They 
are  the  same  to  all,  but  method  is  as  devious  as  a  ser- 
pent's trail.  All  may  be  taught  and  required  to  conform 
to  the  same  principles  and  only  good  will  result  if  the 
principles  themselves  are  sound,  but  once  undertake  to 
compel  all  individuals  to  conform  to  fixed  methods  and 
those  who  submit  will  degenerate  into  mere  machines 
that  will  continually  decline  in  potentiality.  It  is  in 
method,  then,  that  individuality  will  find  its  widest  op- 
portunity for  expression. 

152 


THE  INDIVIDUAL  IN  CO-OPERATION 153 

Freedom  of  Freedom  of  individual  initiative  of  all 
initiative.  forms  of  human  liberty  is  the  most  import- 
ant and  sacred.  It  might  well  be  said  that  it  compre- 
hends all  the  forms  of  liberty,  and  without  it  man  is  an 
abject  slave  whether  he  occupies  a  throne  or  sweeps  the 
streets.  The  right  to  think,  to  draw  one's  own  conclu- 
sions and  formulate  private  judgment,  all  authority  to 
the  contrary  notwithstanding,  is  of  all  rights  the  highest. 
Once  surrendered,  the  foundation  of  true  character  is 
shattered.  It  goes  without  saying  that  each  should  keep 
an  open  mind  and  hear  without  prejudice  all  evidence 
that  may  be  available,  but  it  should  be  advisory  only.  It 
should  not  matter  from  what  source  evidence  comes  or 
upon  what  authority  it  may  be  predicated,  the  final  de- 
cision, both  as  to  its  credibility  and  truth, 

should  rest  with  the  individual  himself.  So 
judge.  l°n£  as  *he  individual  retains  his  right  to  do 

this  he  is  a  free  man,  but  surrender  it  and 
he  falls  into  the  slave  class  regardless  of  birth,  place,  or 
position.  For  this  reason  it  may  be  truthfully  said  that 
the  most  of  mankind  are  in  slavery. 

Self-inflicted  There  are  those  who  bemoan  their  fate  in  so 
slavery.  far  as  conditions  over  which  they  exercise 

little  control  have  restricted  their  liberty,  but  they  are 
seemingly  oblivious  of  the  many  forms  of  slavery  which 
they  have  allowed  to  bind  them  in  servitude,  when  by  the 
proper  assertion  of  themselves  they  could  have  kept  free. 
Perhaps  there  is  little  slavery  in  existence  that  in  the  last 
analysis  was  not  self-imposed  either  by  tame  submission 
or  neglect  to  take  at  the  proper  time  proper  precautions 
against  the  loss  of  liberty. 


154  THE  WAY  OUT 


Causes  of  The  development  of  character  and  intelli- 

slavery.  gence  in  the  individual  is  the  greatest  safe- 

guard against  slavery  of  all  forms.  The  sources  of 
greatest  danger  to  individual  liberty  reside  in  the  man 
himself.  Greed,  avarice,  moral  cowardice,  inordinate 
love  of  pleasure  or  power,  laziness  and  a  lack  of  that  com- 
mon honesty  that  is  always  willing  to  give  a  fair  equiva- 
lent for  what  is  received,  undermine  the  foundation  of 
character  without  which  there  can  be  no  true  liberty. 
Lacking  this  essential  the  aim  is  not  for  liberty  but  li- 
cense. 

liberty  Liberty,  the  greatest  boon  that  God  be- 

defined.  stowed  on  man  is  not,  as  many  seem  to 

think,  the  freedom  to  do  what  one  chooses,  but  is  the  in- 
disputable, inalienable  right  to  do  what  one  ought.  It  is 
the  right  under  moral  law  to  live  one's  life  so  that  the 
highest  and  best  in  it  may  be  fully  developed,  and  to  do  all 
things  that  may  appear  to  promote  the  individual  good, 
recognizing  that  every  other  individual  has  a  similar 
right,  and  that  these  rights  can  never  conflict.  When  con- 
flict does  arise  it  is  an  infallible  indication  that  some 
one's  right  has  been  crossed  and  that  a  readjustment  of 
relations  is  necessary. 


Complexity  of  The  right  of  individual  initiative  is  in  no 
organization  sense  antagonistic  to  the  practice  of  cooper- 
,not.a  ation.  As  men  combine,  their  relations  be- 

limitation  of  ,  ,   .  ,  ..      ,   ,         .,  . 

individual  come  complex  and  interdependent  but  this 
rights.  is  n°t  a  limitation  of  individual  rights.  It 

only  requires  more  care  in  adjusting  the 
social  machinery  so  as  to  preserve  them.  It  is  absurd  to 
say  that  man  is  under  a  moral  obligation  to  work  in  con- 
junction in  order  to  promote  efficiency  and  at  the  same 
time  admit  that  if  he  does  so  he  must  surrender  his  indi- 
vidual liberty — the  right  of  initiative  and  individual 


THE  INDIVIDUAL  IN  CO-OPERATION 155 

judgment,  the  foundation  upon  which  the  hope  of  self- 
development  must  rest.  No  possible  material  advantage 
arising  from  cooperation  could  ever  compensate  for  such 
a  loss. 

Character  The  highest  object  of  life  is  character-build- 
building  jng^  an(j  any  pian  Of  soc}ai  organization 

that  runs  counter  to  this  eternal  purpose 
will  not  stand  the  test  of  time.  Deeply  im- 
planted in  every  human  being  is  a  yearning  for  freedom. 
This  instinct  in  the  ignorant,  the  vicious  and  the  willful 
may  be  misunderstood,  distorted  or  abused,  but  it  is  there 
as  an  agency  for  the  promotion  and  uplift  of  mankind. 
An  enlightened  mind  and  a  well  educated,  sensitive  con- 
science are  required  to  guide  it,  but  without  it  the  race 
would  fall  dangerously  near  the  level  of  beasts. 

It  cannot  be,  then,  that  man  loses  his  liberty  as  he 
comes  more  fully  into  a  socialized  state.  All  the  indi- 
vidual right  that  he  ever  had  was  to  be  exercised  with  due 
regard  to  the  rights  of  others.  It  proves  nothing  to  say 
that  social  development  is  at  the  expense  of  individual 
liberty  even  if  it  is  admitted  that  one  may  do 

TTTl  A    ^^t^YYl 

in  a  lower  state  of  civilization,  where  social 

liberty  mis-  .  ,.        .  .  '     .  .. 

understood.  obligation  is  not  so  pressing  and  immediate, 
that  which  he  may  not  do  at  all  in  a  more 
highly  organized  environment.  Such  a  view  only  demon- 
strates that  the  meaning  of  true  liberty  is  not  understood. 
True  liberty  consists  in  the  right  of  all  to  do  that 
which  is  in  accord  with  moral  law.  It  does  not,  however, 
grant  to  any  the  privilege  of  invading  the  rights  of 
others.  Liberty,  then,  is  not  license  but  is  itself  subject 
to  law  and  must  restrict  itself  to  such  exercise  as  proper 
regard  for  the  rights  of  others  may  impose.  Anything 
less  than  this  denies  the  interdependence  of  man  and  dis- 
regards the  social  principle  upon  which  the  very  exist- 
ence of  the  body  politic  depends. 


156  THE  WAY  OUT 


Cooperation       The  law  of  association  requires  that  closer 

for  increased  cooperation  shall  result  in  higher  efficiency, 
efficiency.  Jf  ^  doeg  not  mo^  ^  reag()n  f Qr  ^ 

action  disappears.  It  is  conceivable,  and  in  fact  is  ad- 
mitted, that  there  are  social  restraints  that  are  limita- 
tions upon  liberty,  but  this  only  proves  that  the  social 
arrangement  is  faulty,  that  there  exists  maladjustments 
which  should  be  corrected.  It  does  not  prove  that  the 
greatest  and  highest  good  cannot  be  reached  by  the 
closest  possible  cooperation.  On  the  contrary,  common 
observation  teaches  that  the  best  qualities  of  the  individ- 
ual are  developed  not  by  leaving  him  alone  but  by  bring- 
ing him  into  close  contact  with  his  fellows  so  that  his 
social  instincts  may  have  opportunity  for  development. 
It  is  only  by  this  process  that  the  individual  can  be  hu- 
manized. In  no  other  way  can  the  love  of  one's  kind,  the 
tender  sympathy  that  distinguishes  man  from  the  brute, 
be  brought  into  play  and  become  the  means  of  unfolding 
the  capabilities  of  the  individual  and  conferring  happi- 
ness upon  those  with  whom  he  may  come  in  contact. 

Life  a  call  Besides,  life  is  more  than  a  struggle  to  pre- 
to  duty.  serve  rights.  It  is  a  call  to  duty  and  it  is 

quite  as  essential  to  the  growth  and  happiness  of  man 
that  he  strive  for  others  as  that  he  shall  do  so  for  himself. 
He  who  would  save  himself  must  often  do  so  by  sacrific- 
ing himself  for  others.  Man  is  a  social  being  inextricably 
bound  up  in  the  social  bond  along  with  his  fellow  beings 
and  therefore  his  best  opportunities  are  to  be  found,  not 
in  contravention  of  the  law  of  association,  but  in  active 
obedience  to  it. 

Whether  considered  from  the  sociological  or  the  eco- 
nomic point  of  view,  the  individual's  best  interest  will  be 
promoted  by  effective  cooperation.  The  effectiveness  of 
collective  effort  depends  upon  leaving  the  individuals  en- 


THE  INDIVIDUAL  IN  CO-OPERATION 157 

gaged  the  greatest  possible  freedom  of  ac- 

Freedomof          f.  f ,     ,,    ,,     .       ,       .     ,  u   , 

action  *lon  so  ^a^  both  ^eir  Physical  and  mental 

powers  may  be  applied.  Principles  should 
be  explained  and  methods  illustrated,  but  the  individual 
operator  should  still  be  left  the  choice  of  method  so  that 
he  might  employ  his  powers  of  initiative  to  accomplish 
the  task  in  the  best  way.  He  may,  and  doubtless  will, 
make  mistakes  but  from  them  he  will  get  an  experience 
that  will  prove  valuable.  Less  than  this  does  not  make 
men  but  machines.  The  director  may  decree  that  the 
machine  is  to  be  turned  but  whether  it  be  done  by  the 
right  hand,  the  left  hand  or  the  foot  should  be  left  to  the 
operator. 

Individuality  demands  that  the  choice  of  methods  shall 
be  left  free  so  that  personal  initiative  may  have  full  play 
and  count  for  what  it  can  make  itself  worth.  The  ave- 
nues of  effort  must  be  kept  open  so  that  aptitude  may 
find  its  place.  This  freedom  of  individual  choice  does 
not  necessarily  imply  that  one  shall  be  left  unaided, 
blindly  to  grope  in  search  of  the  calling  for  which  his 
natural  capacity  best  fits  him.  On  the  contrary,  effective 
cooperation  makes  necessary  the  provision  of  means  to 
aid  in  every  possible  way  the  ascertainment  of  the  indi- 
vidual's capacity  and  aptitude  so  that  he  may  know  just 
what  he  is  best  adapted  to  do,  and  where  the  expenditure 
of  his  energies  will  likely  yield  the  best  results. 

individuality     Individuality,   if  rightly  interpreted,   can 
and  never  be  in  conflict  with  the  law  of  indi- 

vidual being.    The  highest  development  of 
antagonistic,      individuality  can  only  be  attained  by  con- 
formity to  the  law  of  effective  labor,  requir- 
ing as  it  does,  the  most  thorough  organization  and  the 
elimination  of  all  that  is  unnecessary.    Whatever  of  par- 


158  THE  WAY  OUT 


adox  there  may  appear  to  exist  in  this  proposition  is  due 
to  incorrect  analysis  and  failure  to  understand  the  pro- 
cess of  cooperative  effort. 

Does  collective  It  is  claimed  that  monopoly  abridges  the  op- 
effort  abridge  p0rtunity  of  the  individual,  depriving  him 
opportunity  ?  of  ^  stimulus  of  hope.  If  sound)  the  charge 

lies  against  all  forms  of  collective  effort.  If  there  exists 
any  difference  in  this  respect  between  monopoly  and  less 
highly  developed  forms  of  cooperation  it  is  one  of  degree 
only.  The  fact  that  collective  effort  may  render  unneces- 
sary the  performance  of  certain  things,  and  it  is  ad- 
mitted, by  no  means  proves  that  the  avenues  leading  to 
individual  success  have  been  closed  or  even  narrowed. 
The  multiplication  of  wants  superinduced  by  more  effi- 
cient production,  as  was  the  case  when  power  machinery 
was  introduced,  creates  more  jobs  than  the  elimination  of 
the  unnecessary  destroys. 

Cooperation  He  who  works  in  collaboration  with  many 
^ves  has  greater  opportunity  to  demonstrate  his 

opportunity       pr0wess  and  is  able  to  get  much  more  re- 

to  demonstrate  ,   „       ,  .        ~,         , ,  ,  ,  ,  .,  1 

prowess  ward  for  his  effort  than  would  be  possible 

if  he  worked  alone.  It  is  not  denied  that  ig- 
norance and  abuse  are  often  present  in  collective  under- 
takings and  that  they  cause  injustice  and  hardship  for 
individuals,  but  they  do  not  inhere  in  the  principle  of 
combined  effort.  They  are  faults,  not  of  the  thing  itself, 
but  result  from  mismanagement  and  are  evils  and  imper- 
fections to  be  eliminated  as  the  evolution  proceeds  on  its 
way  to  a  realization  of  its  proper  development.  That  this 
is  being  accomplished  is  obvious  even  to  the  casual  ob- 
server. Comparison  of  the  condition  of  the  less  powerful 
but  more  numerous  class  of  common  workers  now  with 
that  which  obtained  during  any  former  period  furnishes 


THE  INDIVIDUAL  IN  CO-OPERATION 159 

indisputable  proof  that  better  treatment  and  wider  op- 
portunity are  now  accorded  them  than  ever  before. 

Human  desire  Implanted  in  every  individual  in  varying 
to  excel.  degree  is  the  desire  to  rise  in  importance 

and  in  the  appreciation  of  his  fellows.  Without  this  qual- 
ity there  could  be  no  progress.  Whether  it  manifests 
itself  in  the  little  boy  who  strives  to  win  the  game,  to  out- 
distance his  playmates  in  the  race  or  to  learn  his  lessons 
better  than  they,  or  in  the  little  girl  who  strives  either  to 
charm  or  be  more  proficient  in  her  studies,  or  in  men  or 
women  of  more  maturity  who  do  their  best  to  excel,  it  is 
the  assertion  of  the  ego.  This  is  the  divine  urge  given 
man  to  induce  self-development  and  efficient  perform- 
ance. It  would  indeed  be  destructive  of  hope  of  cooper- 
ative success  if  organization  should  destroy  or  even  seri- 
ously impair  this  indispensable  prerequisite  to  individual 
achievement. 

increasing         More  and  more  keenly  are  the  directors  of 

appreciation       cooperation  recognizing  that  the  success  of 

enterprise  depends  largely  upon  giving  this 

of  individual        .-,..-,      ,     .          ,.  ,.       £  j\  i 

worth  individual   incentive,   direction   and  help. 

Jealousy,  that  bane  of  small  minds,  and  per- 
sonal favoritism  in  many  cases  no  doubt  interfere  in  the 
apportionment  of  recognition  and  reward,  but  the  reac- 
tions from  such  practices  are  gradually  proving  their  un- 
wisdom. 

It  is  becoming  increasingly  clear  to  the  intelligently 
selfish  that  the  more  correct  policy  of  making  merit  the 
deciding  factor  in  the  matters  of  promotion  and  better 
pay  is  the  true  way  to  get  the  best  results.  Waiving  the 
moral  question  and  placing  the  matter  upon  the  plane  of 
cold  and  calculating  selfishness,  the  directing  forces  of 


160  THE  WAY  OUT 


collective  effort  cannot  afford  to  do  otherwise  than  to  pro- 
mote the  individual  good  of  those  who  serve  them  because 
it  pays  to  do  so. 

Sycophancy  It  may  have  been  generally  true  in  the  past, 
on  the  an(j  it  may  still  be  true  in  some  cases,  that 

the  servile  diplomat,  hiding  contempt  under 
a  smile  of  approbation,  climbed  over  the  heads  of  his  fel- 
lows regardless  of  their  superior  characters  and  merito- 
rious achievements,  but  time  is  bringing  corrections  and 
the  tendency  is  ever  becoming  more  pronounced  in  favor 
of  the  recognition  of  merit  and  fitness. 

Greater  Greater  cooperation,  dependent  as  it  must 

complexity  be  Up0n  higher  efficiency  for  its  right  to  live, 
necessarily  compels  a  higher  moral  stand- 
standard  ar(**  -^>  when  transportation  was  con- 
ducted by  the  muleteer,  the  drunken  driver 
drove  his  team  over  a  precipice,  destroying  both  himself, 
his  team  and  his  load,  it  was  not  a  matter  of  much  im- 
portance, but  when  the  drunken  engineer  hauling  a  heavy 
train  ditches  it,  it  is  a  much  more  serious  affair.  In  the 
latter  case  the  greater  loss  of  life  and  destruction  of  prop- 
erty that  result  from  moral  laxity  compel  the  managers 
of  transportation  to  demand  a  stricter  observation  of 
morality.  The  morals  of  neither  the  management  nor  the 
workers  may  be  any  better,  but  the  exercise  of  morality 
becomes  imperative. 

Even  selfish-  Reverting  to  the  controlling  principle  of  sel- 
ness  serves.  fishness,  it  will  be  seen  that  it  goads  men  to 
higher  standards  because  the  evil  that  the  indulgence  of 
immorality  superinduces  costs  too  much  to  be  tolerated. 
Can  it  be  successfully  maintained  that  this  economic 
pressure  that  compels  men  to  do  right  is  productive  of 


THE  INDIVIDUAL  IN  CO-OPERATION 161 

destructive  tendencies  that  weaken  individuality  and 
curb  initiative?  On  the  contrary,  does  it  not  spur  man 
on  to  do  his  best,  to  conserve  his  energies  and  to  develop 
along  the  line  of  his  particular  aptitudes? 

individual  it  is  patent  to  all  that,  as  effectiveness  be- 
responsibiiity  comes  more  imperative,  individual  responsi- 
bility increases.  When  one,  in  a  chain  of 
specialists  fails  to  do  the  part  assigned  to  him,  it  inter- 
rupts the  whole  process,  therefore  it  is  quite  essential 
that  he  shall  keep  himself  fit  so  that  there  may  be  main- 
tained the  continuity  of  operation  upon  which  efficient 
production  depends.  Failing  in  this  essential,  the  indi- 
vidual finds  himself  displaced.  In  a  lower  state  of  organ- 
ization the  individual  may  be  more  lax  in  his  methods. 
The  improvident  farmer  may  sit  around  the  village 
blacksmith  shop,  frittering  away  his  time  discussing  the 
local  happenings,  but  the  conductor  on  the  fast  train  has 
too  much  dependent  upon  his  prompt  and  careful  atten- 
tion to  indulge  in  diversion. 

Where  is  there  greater  need  and  opportunity  for  the 
evelopment  and  use  of  intellectual  power  by  all  classes 
f  men  from  the  leader  down  to  the  lowest  grade  helper 
than  is  to  be  found  in  large  operations?    Where  else  can 
the  wisdom  that  comes  from  experience  be  made  so  abun- 
dantly productive?    Where  else  can  such  expertness  be 
acquired,  and  when  gotten,  used  so  effectively?    Organ- 
ization is  merely  an  instrument  that  binds  men  together, 
but  it  is  only  framework  and  inanimate.     The  things 
that  make  it  function  are  thought  and  ap- 
plied energy,  both  furnished  by  individuals, 
individual's         *L  .      ?J '  J 

importance.       The  thinking,  planning,  and  executing  find 
their  origin  in  the  brain  of  man.    It  is  plain, 
therefore,  that  those  who  expect  to  be  the  beneficiaries  of 
effective  collective  effort  can  no  more  afford  to  cramp  the 


162  THE  WAY  OUT 


minds  of  men  than  the  engineer  can  afford  to  put  out  the 
fire  that  makes  his  power.  The  interest  of  all  will  be  best 
subserved  by  the  highest  possible  development  of  thought, 
the  widest  dissemination  of  knowledge  and  the  strictest 
observation  of  an  elevated  moral  code. 

America  leads  The  fact  that  America  has  reached  a  higher 
m  mass  degree  of  efficiency  than  other  countries  in 

mass  production  is  in  no  small  measure  due 
to  the  wider  recognition  and  more  general  application  of 
these  doctrines  to  industry.  Viewing  human  organiza- 
tion as  an  autocracy  or  even  at  best  an  oligarchy,  the 
central  authority  sends  out  the  power  to  all  the  consti- 
tuent elements  of  the  organization.  The  success  of  the 
operation  depends  upon  the  proper  functioning  of  this 
directing  head.  That  which  comes  to  the  less  important, 
subordinate  elements  is  reflected  power  and  judgment. 

Autocracy         To  change  the  figure,  they  are  but  sponges 

and  that  imbibe  the  fluid  that  flows  out  from  the 

source  and  comes  into  contact  with  them. 

Under  the  more  liberal  democratic  theory 

postulated  upon  the  doctrine  of  mutual  help 

for  mutual  service  each  member  of  the  cooperation  is 

equally  free  to  think,  to  advise  and  to  employ  his  power 

of  initiative  in  order  that  the  operation  may  be  made  as 

efficient  as  possible. 

Napoleon  It  has  been  said  of  Napoleon  that  he  was  at 
recognized  ajj  times  open  to  receive  suggestions  even 
from  the  humblest  soldier  in  his  army  and 
to  give  to  worth  the  recognition  due  it.  The 
efficiency  and  loyalty  of  his  men,  scarcely  equalled  and 
never  excelled  in  any  army  before  or  since  his  time,  were 
no  doubt  due  in  great  measure  to  Napoleon's  wise  use  of 


THE  INDIVIDUAL  IN  CO-OPERATION 163 

psychology.  He  did  not  drive  but  led  his  forces.  He  bound 
them  to  him  as  with  hooks  of  steel  by  the  simple  process 
of  making  them  conscious  that  he  thought  them  men,  not 
mere  fighting  machines. 

Equality  of        How  much  better  it  will  be  for  all  when  the 
opportunity       directing  forces  of  the  world  come  to  recog- 
nize the  eternal  truth  that  equality  of  oppor- 

foundation.  .  /./?-,    ,  • 

tunity  is  the  only  safe  foundation  upon 
which  to  base  the  hope  of  genuine  progress.  The  lofty  air 
and  self-complacent  aloofness  to  which  men  of  little 
minds  vested  with  power  seem  especially  susceptible  are 
unfailing  signs  of  inferiority.  Such  men  by  their  foolish 
attitude  build  a  wall  around  themselves  that  shuts  out  the 
world  from  them.  The  more  intelligent  realize  the  need 
for  the  widest  vision  and  appreciate  the  inestimable  bene- 
fits that  come  from  generous  contact  with  life.  These 
capable  leaders  will  see  to  it  that  all  the  avenues  of  infor- 
mation are  kept  open  to  them  so  that  judgment  may  be 
predicated  upon  a  full  knowledge  of  facts.  They  will 
insist,  too,  that  those  under  them  shall  have  light  and 
knowledge,  realizing  that  the  broader  and  deeper  the 
minds  of  those  who  cooperate  with  them  the  greater  will 
be  the  capacity  to  produce  satisfactory  results.  Holding 
up  to  their  men  the  possibility  of  reaching  the  highest 
point  that  their  capacity  will  permit,  they  will  excite  an 
emulation  and  loyalty  that  will  bind  their  followers  in  a 
common  bond  to  do  their  best. 

Under  liberal  guidance  the  individual  worker  will 
enjoy  freedom  of  initiative  to  apply  his  own  methods  and 
will  be  rated  according  to  actual  results.  He  will  receive 
the  recognition  and  remuneration  that  his  effort  deserves 
and  his  just  meed  of  praise  will  not  be  denied  him  because 
perforce  it  might  encourage  him  to  hope  for  a  higher 
wage. 


164  THE  WAY  OUT 


More  just  This  intelligent  leadership  will  be  first  to  re- 
distribution by  turn  to  the  worker  his  fair  share  of  the  in- 

crease  resulting  from  higher  individual  effi- 
ciency. It  will  not  be  influenced  by  the  fear 
that  workers  will  learn  too  much  and  become  dangerous 
in  the  employ  of  someone  else,  but  it  will  strive  to  bring 
out  the  best  that  is  in  them  and  then  make  it  to  their  in- 
terest to  continue  with  it.  By  precept  and  example  it  will 
seek  to  teach  correct  economics  so  that  all  may  know  the 
benefits  that  follow  increased  effectiveness.  Not  sup- 
pression but  development  will  be  the  slogan. 

Amity  to  dis-  When  this  better  grasp  of  effects  has  been 
place  enmity,  realized,  class  dissensions  and  hatreds  will 
give  way  to  amity  and  mutual  regard,  not  necessarily  be- 
cause men  have  become  more  altruistic,  but  because  they 
will  have  become  more  intelligently  selfish.  Antagonism, 
hate,  distrust,  and  revenge  are  elements  of  war,  and 
everything  connected  with  war  is  destructive.  Man  yet 
will  come  to  learn  that  destruction  is  at  his  expense  and 
not  for  his  profit,  and  when  once  this  truth  has  been 
thoroughly  impressed,  he,  from  sheer  selfishness,  if  no 
higher  motive,  will  refuse  to  permit  it. 

Over  Collective  effort  is  fairly  open  to  the  criti- 

specialization.  cjsm  y^t  in  the  struggle  for  higher  effi- 
ciency in  production  it  develops  a  strong  tendency  to  over- 
specialization.  If  this  process,  highly  necessary  within 
certain  limits,  is  carried  too  far  it  restricts  unduly  the  in- 
dividual's opportunity  to  get  that  wider  experience  which 
is  indispensable  to  correct  judgment.  It  goes  without 
saying  that  the  individual  who  specializes  can  acquire  a 
degree  of  proficiency  that  he  could  not  possibly  attain  in 
doing  diverse  things,  but  it  does  not  follow  that  each  indi- 


THE  INDIVIDUAL  IN  CO-OPERATION 165 

vidual  should  be  a  specialist  or  even  that  an  individual 
should  remain  the  same  kind  of  a  specialist  during  life. 

Wide  Cooperation,  if  it  is  to  be  highly  efficient, 

experience  needs  men  having  general  knowledge  and 
experience  as  well  as  those  who  excel  in  a 
narrower  sphere.  Its  managerial  staff  must  be  generally 
qualified  while  its  department  workers  should  be  special- 
ists in  the  things  which  they  are  to  do.  No  rigid  line  or 
insurmountable  barrier  should  be  permitted  to  separate 
these  two  classes.  The  way  should  be  kept  open  by  which 
the  members  of  each  class  may  pass  from  one  side  to  the 
other  as  the  particular  individuals  demonstrated  the  apt- 
itude and  fitness  that  might  make  the  change  advisable. 
To  express  it  differently :  the  management  should  be  such 
as  to  inspire  in  each  worker  the  belief  that  his  position  in 
the  operation  depends  entirely  upon  his  own  fitness  and 
merit  and  that  every  place  is  open  to  him  when  fair 
chance  and  his  own  qualifications  entitle  him  to  it. 

To  produce  this  effect  upon  the  minds  of  the  workers  it 

would  be  necesary  to  make  it  fairly  easy  for  the  worker 

to  select  the  class  of  work  he  prefers  so  as  to 

Freedom  of  jye    Wm    ^    ^    latjtude    that    might    be 

choice  of  ,.     ,  ,     .     ,  .       ~  ,.  ,  f        ,. 

task  practicable  in  his  effort  to  discover  his  apti- 

tude. This  policy  would  not  only  serve  to 
develop  the  specialist,  but  it  would  likewise  permit  those 
who  want  a  more  general  grasp  of  the  intricacies  of  the 
operation  with  the  view  of  qualifying  themselves  for 
managerial  duty  to  go  through  an  apprenticeship  in  all 
departments  that  would  qualify  them  for  entering  the 
broader  fields. 


166  THE  WAY  OUT 


Self-  A  system  operated  in  accord  with  these 

perpetuating  principles  would  likely  be  self -perpetuating, 
system.  whereas  under  a  less  liberal  plan  the  death 

or  disability  of  a  few  of  the  more  important  managers 
would  put  the  entire  operation  upon  the  rocks.  Mani- 
festly, then,  collective  effort  of  itself  does  not  militate 
against  the  development  of  the  individual  but,  on  the  con- 
trary, furnishes  him  opportunities  for  service  to  himself 
and  society  that  would  not  otherwise  be  open  to  him  at  all. 
Whatever  deprivation  the  individual  may  suffer  in  col- 
lective as  contrasted  with  individual  effort  comes  from 
maladjustment  and  abuse  of  the  collective  principle  and 
not  because  the  laws  of  cooperative  effort  make  it  neces- 
sary. The  remedy  lies  in  the  development  of  intelligence 
so  that  the  necessary  adjustments  and  corrections  may  be 
made — not  in  the  destruction  or  even  the  limitation  of 
proper  cooperative  effort. 


CHAPTER  X. 

MONOPOLY. 

Special  Every  social  act  must  be  in  accord  with  the 

privilege  a         wjj}  Of  the  sovereign,  which  in  a  free  society 
grant  from        }g  ^  peopie  themselves.    The  performance 

the  sovereign.         ,,  .   ,  i  , ,  , 

oi  any  social  act  by  a  part  of  the  people, 
either  by  the  sufferance  or  the  direct  permission  of  the 
sovereign  involves  a  privilege.  The  sovereign  may  grant, 
regulate,  or  withhold  any  such  privilege  unless  it  has 
limited  its  own  power  by  constitutional  provision  and  in 
such  cases  it  can  remove  these  limitations  by  whatever 
process  it  may  have  prescribed  for  repossessing  itself  of 
unlimited  power. 

Sovereign          It  will  be  noted  here  that  the  power  to  grant 
privilege  rests  upon  the  premise  that  the 
grantor  has  the  unlimited  right  to  do  itself 
the  thing  which  the  privilege  permits  the 
grantee  to  do.    In  other  words,  society  is  self -sufficient 
and  has  the  right  and  power  to  undertake  the  perform- 
ance of  any  function  which  it  may  decide  to  be  essential 
to  its  own  comfort  and  well  being.    Society,  aside  from  its 
self-imposed  limitations  of  power,  which  may  be  removed 
at  will  as  already  explained,  has  power  to  do  any  social 
act,  or  perform  any  service  that  is  not  in  contravention 
of  moral  law. 

The  exercise  of  the  power  of  the  sovereign  by  others, 
either  by  sufferance  or  direct  grant,  in  no  wise  limits  its 
right  and  power  to  reassume  such  functions  at  any  time 
that  public  exigency  may  make  it  desirable  to  do  so. 
Neither  the  direct  act  of  the  sovereign  nor  its  permission 
to  others  to  perform  social  service  raises  any  question  of 

167 


168  THE  WAY  OUT 


legitimacy  of  function  since  the  primary  power  and  right 
are  vested  in  the  State  and  the  method  of  exercise  is 
merely  a  matter  of  public  policy.  When,  as  is  sometimes 
the  case,  the  legislative  branch  of  government  misuses 
the  taxing  power  to  destroy  an  undesirable  social  service, 
it  is  only  doing  by  indirection  and  subterfuge  that  which 
it  has  full  power  to  do  by  an  act  of  direct  prohibition. 

All  social  acts  The  assumption  that  there  is  any  distinction 
public  between  services,  classifying  some  as  pri- 

vate business  and  others  as  public  service 
is  utterly  without  foundation.  Any  such  division  is  nec- 
essarily arbitrary.  The  bootblack  who  shines  the  shoes  of 
the  traveler  is  as  truly  engaged  in  public  service  as  the 
trunkline  railway  that  takes  him  to  his  destination.  They 
both,  under  private  initiative,  are  exercising  social  func- 
tions under  a  permission  which  the  sovereign  may  recall 
when  it  chooses  to  do  so  either  for  the  purpose  of  confer- 
ring it  upon  others  or  assuming  the  functions  itself.  So- 
ciety through  its  organization,  the  government,  whenever 
it  chooses,  may  assume  the  duty,  doing  whatever  it  may 
wish  done,  and  may  deny,  if  it  so  wills,  to  any  other 
agency  the  privilege  of  engaging  in  such  service. 

Monopoly  of  Monopoly,  with  respect  to  its  origin  and  life- 
force  or  principle,  may  be  classified  as  monopoly  of 
selection.  force  and  mon0p0iy  Of  selection.  Govern- 
ment, owing  its  origin  to  the  majority  consent  of  the  gov- 
erned, belongs  to  the  latter  class  while  arbitrary  govern- 
ment of  whatever  kind  belongs  to  the  former.  So  long  as 
government  represents  the  will  of  the  people  and  the 
means  for  its  expression  exists,  all  monopolies  within  the 
boundaries  of  the  country  are  those  of  selection,  and  they 
possess  their  privileges  either  because  the  public  wishes 
them  to  do  so  or  it  is  too  indifferent  to  exercise  its  power 


MONOPOLY  169 


to  get  rid  of  them.  Monopolies  of  selection,  so  far  as  the 
public  regarded  as  a  social  unit  is  concerned,  often  be- 
come monopolies  of  force  in  their  relations  to  the  indi- 
vidual citizen.  The  possession  of  a  patent,  the  ownership 
of  natural  resources,  the  command  of  the  requisite  capital 
and  the  economic  superiority  of  concentrated  control  and 
single  unit  operation,  as  well  as  many  other  circum- 
stances, give  monopoly  the  power  to  impose  its  will  upon 
those  who  are  dependent  upon  it  for  service.  Especially 
is  this  true  of  private  monopoly. 

Ideal  Monopoly  of  selection  is  of  course  the  ideal, 

monopoly.  existing  by  the  will  of  the  public  and  en- 
dearing itself  to  all  because  it  is  an  agency  of  human 
service.  Its  motive  is  to  reach  the  highest  possible  degree 
of  efficiency  and  to  distribute  its  benefits  at  the  lowest 
possible  cost.  Monopoly  as  respects  its  ownership  is  di- 
vided into  two  classes,  public  and  private. 

Social  service  As  already  explained,  all  social  service 
under  private  un(jer  private  initiative  rests  upon  privilege 
which  the  sovereign  grants  or  permits  be- 
cause of  its  unwillingness,  inability  or  fail- 
ure to  provide  the  organization  necessary  to  afford  ade- 
quate social  service.  The  sovereign,  however,  reserves 
or  should  reserve  the  power  to  restrict,  restrain,  or  pro- 
hibit all  privilege  and  to  establish  its  own  agencies  of 
public  service  whenever  the  welfare  of  society  may  de- 
mand it.  So  long  as  this  power  is  retained  by  the  public 
whatever  of  evil  may  arise  is  remediable,  but  once  it  is 
lost,  the  social  body  becomes  an  incompetent,  subject  to 
all  the  oppression  that  its  masters  may  impose  upon  it. 


170  THE  WAY  OUT 


The  triumph  of  privilege  necessarily  means  the  destruc- 
tion of  free  government  and  all  that  it  connotes. 

Laissezfaire  Under  the  laissez-faire  method  the  process 
involves  Of  eliminating  the  multiplicity  of  small 

units  of  service  and  substituting  for  them 
the  larger  units  involves  the  use  of  both 
force  and  selection.    These  entirely  diverse  methods  co- 
operate to  accelerate  the  speed  of  the  evolution  of  social 
progress  on  its  way  to  its  ultimate  goal  —  monopoly. 

The  effect  Any  restraint,  regulation,  or  control  of 
of  public  privilege  by  the  sovereign  is  in  an  economic 

regu  ation.  sense  an  arbitrary  interference  with  the 
natural  method  of  its  elimination.  In  other  words,  the 
effect  of  such  interference  is  to  lengthen  the  life  of  priv- 
ilege by  retarding  its  growth.  This  policy,  if  adhered  to, 
tends  to  crystallize  the  existing  state  of  social  growth  and 
is  analogous  to  the  practice  among  some  backward 
peoples  of  binding  parts  of  the  human  body  to  prevent 
normal  development.  It  seeks  to  preserve  the  subnormal, 
to  keep  society  under  an  economic  handicap,  not  because 
this  is  good  for  it,  but  because  progressive  development 
would  stop  the  tribute  that  insufficiency  compels  it  to  pay. 

Society  If  society  devoted  a  tithe  of  the  time  and 

usually  talent  to  making  provision  for  serving  itself 

against  ^at  it  does  to  promoting  and  making  per- 

r 


progress.  ,  .  ,.   . 

manent  unsound  economic  policies  under 
which  it  must  necessarily  lose,  progress  would  be  much 
more  rapid.  These  interruptions  deferring  as  they  do,  if 
successful,  the  better  possible  adjustments  of  the  social 
machine,  may  appear  of  great  importance  to  those  who 
value  a  few  years  or  centuries,  but  considered  as  mere 


MONOPOLY  171 


j 


ripples  in  the  stream  of  infinite  evolution  they  are  incon- 
sequential, for  no  sooner  do  they  begin  to  take  effect  than 
a  counter  influence  is  developed  to  overcome  them. 

Greed  defeats  The  beneficiaries  of  privilege,  prompted  by 
itself.  inordinate  greed,  can  very  safely  be  relied 

upon  to  offset  by  their  own  injudicious  acts  all  the  benefits 
which  may  have  been  unwittingly  bestowed  upon  them  by 
an  uninformed  public. 

Special  Special  privilege,  even  under  the  pressure  of 

immediate  self-interest,  is  not  likely  to  look 
ed'  far  ahead.  Make  hay  while  the  sun  shines, 
is  its  motto  and  its  effort  is  unremitting  to  make  as  much 
as  it  can  in  the  shortest  possible  time.  Under  these  con- 
ditions it  avails  itself  of  every  opportunity  to  strengthen 
its  position,  increase  the  size  of  its  organization  and  dis- 
place its  competitors.  Blindly  it  may  be,  but  faithfully 
it  fulfills  its  destiny. 

Captains  of  ln  this  sense,  it  may  be  truthfully  said  that 
of  all  who  have  advocated  the  highest  devel- 
opment of  the  cooperative  principle — Com- 

Sociahsm  and  .  .  _  , 

Communism  mumsm  and  Socialism,  if  one  pleases  to  use 
these  terms — the  so-called  captains  of  indus- 
try have  done  most  to  hasten  the  coming  of  the  time  when 
practical  application  of  the  full  cooperative  principle  will 
become  possible.  Whatever  may  have  been  their  motives, 
and  there  is  little  doubt  that  they  were  mixed,  they  are 
justly  entitled  to  the  distinction  of  having  been  path- 
finders who  not  only  are  making  it  possible  for  society  to 
find  its  way  out  of  the  economic  morass  but  are  creating 
conditions  that  will  compel  it  to  go  forward  to  the  goal. 

The  progress  toward  monopoly  is  of  course  not  uni- 
form.   Certain  lines  of  activity  naturally  fall  in  the  mo- 


172  THE  WAY  OUT 


nopoly  class.  Some  of  these  have  already 
The  germ  of  been  p0jnte(j  out<  others,  through  an  eco- 

monopoly in  .  -    ...  e 

all  business.  nomic  process  of  elimination  of  the  unneces- 
sary gradually  approach  the  monopolistic 
state,  but  all  methods  of  social  service  have  in  them  the 
germ  of  monopoly  and  their  degree  of  approach  depends 
upon  the  extent  of  their  development. 

The  public's  When  monopoly  exists,  the  public  is  con- 
choice  of  fronted  with  the  very  practical  question  of 
choice  between  its  two  forms,  private  mo- 
nopoly based  on  privilege,  or  public  monopoly  whose  right 
to  exist  rests  upon  its  power  to  serve.  The  decision  be- 
tween these  two  forms  should  rest  upon  very  broad 
grounds.  All  elements  should  be  considered  and  that 
form  chosen  which  may  prove  the  superior  from  society's 
point  of  view.  These  two  forms  of  monopoly  have  certain 
things  in  common.  Each  requires  an  aggregation  of  cap- 
ital and  a  centralized  control.  Each  must  render  service 
to  the  public. 

Public  and         Private  monopoly  gathers  its  capital  by 
private  promising  the  investor  a  profit  on  the  in- 

monopoly          vestment.    Public  monopoly  gets  its  capital 

contrasted.  ,,  ,    ,,  , \     J  T,. 

through  the  government  s  power  to  tax.  If 
bonds  are  issued,  private  monopoly  offers  its  capital  as 
margin,  and  public  monopoly  pledges  the  faith  of  the  gov- 
ernment, which  in  turn  rests  upon  the  power  to  tax.  The 
safety  of  the  former  investment  depends  upon  the  hon- 
esty and  the  efficiency  of  the  management,  while  that  of 
the  latter  depends  upon  the  honor  and  stability  of  the  gov- 
ernment. If  the  private  enterprise  fails,  the  stockhold- 
ers, unsecured  creditors,  and  bondholders  lose  in  the 
order  named.  If  the  public  enterprise  fails,  the  creditors 
are  all  paid  and  the  loss  is  distributed  through  taxation. 


MONOPOLY  173 


Public  Public  enterprise,  getting  its  capital  by  tax- 

monopoly's        ation,  since  it  is  only  requiring  society  to 
put  up  the  capital  for  its  own  service  makes 

capitalization.     n°  Pled^e  °f  return  °f  either  PrinciPal  or 

dividend.  If  the  capital  is  to  be  borrowed, 
the  government  offering  greater  security  can  float  its 
bonds  at  a  lower  rate  than  any  private  organization. 
With  reference  to  their  respective  powers  to  aggregate 
capital,  private  and  public  monopoly  may  be  regarded  as 
limited  and  unlimited  partnerships.  The  former  can 
only  call  upon  its  limited  number  of  stockholders  to  con- 
tribute the  specific  amounts  to  which  they  may  have  com- 
mitted themselves,  while  the  latter,  embracing  all  the 
people,  may  call  upon  each  of  them  to  furnish  all  that  he 
possesses.  Private  monopoly,  not  having  the  power  to 
compel  original  contributions,  must  rely  upon  its  appeal 
to  cupidity  to  effect  this  purpose. 

Public  Public  monopoly  in  the  size  of  the  unit,  the 

superior  concentration  of  control  and  the  ability  to 

command  support  is  superior  to  private  mo- 
monopoly.  ,  TJ.  *  •  j.« 

nopoly.  Its  processes  of  integration  are 
more  efficient  and  less  costly  than  those  of  private  mo- 
nopoly. It  is  obvious  that  public  monopoly  with  the  abil- 
ity to  gather  its  capital  in  larger  amounts,  with  greater 
ease  at  less  cost  and  under  no  necessity  to  earn  a  profit 
can  operate  with  a  lower  fixed  charge  than  private  mo- 
nopoly. 

The  principles    These  forms  of  monopoly  conform  to  en- 

of  public  and      tirely  diverse  principles.    Private  monopoly 

must  of  necessity  make  profit  its  controlling 

monopoly  , .  .,  .   ,  ,  ,  ° 

different  motive  as  its  existence  depends  upon  it. 

Service  is  secondary.     Its  ruling  motive 

being  gain  it  must  give  out  as  little  as  possible  for  that 


174  THE  WAY  OUT 


which  it  takes  in.  In  other  words,  it  must  put  on  all  the 
business  will  bear.  Public  monopoly,  on  the  other  hand, 
aside  from  its  power  to  serve,  has  no  reason  for  its  exist- 
ence. Private  monopoly  must  serve  but  its  ability  to  do 
so  is  limited.  It  must  conserve  its  resources  to  the  extent 
necessary  to  preserve  its  life  and  insure  its  growth.  It 
cannot  do  this  unless  it  charges  a  profit  on  the  cost  of  its 
services  in  order  to  pay  the  higher  wage  of  capital,  to 
compensate  shareholders  for  risks  and  in  addition  satisfy 
their  cupidity  to  the  extent  necessary  to  induce  them  to 
continue  the  enterprise.  Under  these  conditions  it  is  only 
the  benefits  of  the  enterprise  in  excess  of  these  require- 
ments that  are  available  for  distribution  to  the  public. 

Private  Under  private  monopoly,  special  privilege 

monopoly          must  first  receive  its  reward,  leaving  the 

public  to  take  what  remains  if  there  should 

serve  itself.          f  .     ..          TjL      .,,  , 

be  a  remainder.  It  will  not  be  seriously  con- 
tended that  private  monopoly,  combining  only  a  small 
percentage  of  the  people,  having  to  pay  higher  for  its  cap- 
ital, appealing  as  it  must  to  the  cupidity  of  the  individual, 
can  possibly  equal  public  monopoly  in  the  matter  of 
strength,  since  it  embraces  all  the  people ;  or  in  economic 
efficiency  of  cost  of  organization  and  aggregation,  as  the 
latter  is  under  no  compulsion  to  earn  profits  to  pay  divi- 
dends on  cash  capital,  and  even  if  bonded  capital  is  em- 
ployed it  gets  it  at  a  lower  rate. 

Private  Private  monopoly  must  also  earn  in  addi- 

monopoiy  ^jon  ^0  ^  amount  necessary  to  pay  divi- 
must  exploit.  dendg  an  amount  sufficient  to  provide  for 
the  growth  and  extension  of  the  business.  Public  mo- 
nopoly, on  the  other  hand,  is  under  no  such  obligation. 
Having  access  to  and  command  of  the  entire  resources  of 


MONOPOLY  175 


the  state  or  nation  it  can  compel  all  to  furnish  their  sur- 
plus capital  to  the  extent  that  efficient  public  service  may 
require  its  use. 

A  contest  The  selection,  as  the  evolutionary  process  of 

between  elimination  of  the  less  efficient  units  of 

social  service  was  taking  place,  was  between 
the  less  and  the  more  desirable  agencies  of  the  same  kind. 
They  conformed  to  the  same  principles,  which  were  of 
different  degrees  of  development.  The  contest  between 
private  and  public  monopoly  is  different.  It  represents 
a  competition  between  systems  that  are  unlike.  The  one 
functions  on  the  profit  principle,  or  is  capitalism  carried 
to  its  logical  ultimate,  the  other  represents  the  highest 
economic  development  of  the  service  system,  under  which 
production  takes  place  at  the  public's  risk  and  distribu- 
tion is  made  at  cost.  This  contest,  then,  is  the  final  test 
between  these  systems  to  prove  which  is  the  superior  in- 
strument of  social  service  and  to  establish  incontestibly 
its  right  to  displace  the  inferior.  Either  system  possess- 
ing two  things  would  seem  to  be  fairly  entitled  to  be  se- 
lected as  the  superior ;  economic  superiority  in  providing 
the  organization  and  machinery  for  production,  and  the 
ability  to  make  the  most  general  and  equitable  distribu- 
tion of  benefits. 

Private  When  it  is  considered  that  the  aggregation 

monopoly  Of  fae  necessary  capital  to  conduct  private 

lacks  moral        monopoly  must  be  accomplished  either  by 

foundation.          ,    ,  .  „,  ,.  ,  .  ,   ,    ,  ,, 

taking  as  profit  that  which  belongs  to  others 
without  giving  an  equivalent  value  in  return  therefor,  or 
by  appealing  to  the  cupidity  of  investors  by  holding  out 
to  them  hopes  of  becoming  beneficiaries  of  such  unmoral, 


176  THE  WAY  OUT 


not  to  say  immoral,  exploitation,  it  becomes  apparent  that 
private  monopoly  stands  condemned  on  moral  grounds. 

Private  Practically  all  the  shortcomings  and  evils  of 

monopoly          private  monopoly  are  directly  due  to  this 

1  lack  of  moral  foundation-  Tt  cannot,  if  it 
would,  be  just.  In  its  very  nature  it  is  an 
exploiter  and  its  life  and  growth  depend  upon  the  success- 
ful continuation  of  the  practice.  This  necessity  forces  it 
to  make  false  statements  minimizing  its  worth  when  the 
tax  assessor  appears  and  to  make  equally  false  claims  of 
having  value  that  it  does  not  possess  when  rates  are  to  be 
made.  It  also  accounts  for  that  peculiar,  but  not  rare, 
phenomenon  in  psychology,  illustrated  in  the  state  of 
mind  into  which  public  commissions  sometimes  fall,  en- 
abling them  to  accept  as  true  both  of  these  palpable  mis- 
representations. 

Private  Private  monopoly,  an  illegitimate,  begotten 

monopoly  an(j  ^OYn  jn  unm0rality,  gravitates  natur- 
ally toward  corruption.  It  is  quite  probable 
con-option  ^at  **s  employment  of  the  crude  method  of 
bribery  is  exceptional.  Its  methods  are  more 
refined  as  well  as  more  effective.  The  possession  of 
wealth  gives  it  power  which  it  unceasingly  exercises  to 
mislead  public  opinion,  both  by  misrepresentation  of 
facts  and  their  suppression.  By  every  method  that  in- 
genuity can  devise  it  seeks  to  exercise  its  powerful  influ- 
ence upon  all  branches  of  government  to  make  it  serve 
special  privilege  by  enabling  it  to  increase  the  exactions 
it  makes  on  the  public.  It  follows  its  immediate  pecu- 
niary interest  as  persistently  as  the  needle  of  the  compass 
does  the  magnetic  pole.  Its  direct  interest  is  in  promot- 
ing bad  government  in  so  far  as  that  serves  the  purpose 
of  increasing  the  tribute  that  it  imposes  upon  the  public. 


MONOPOLY  177 


It  is  the  constant  promoter  of  that  which  a 

Its  effect  on  _   r      _  .  -    _ 

government  government  conducted  in  the  interest  of  the 
whole  people  should  consistently  oppose. 
Its  genesis  being  evil,  like  a  cancer  it  continues  to  extend 
its  roots  through  the  body  politic  until  it  finally  destroys 
the  last  vestige  of  society's  power  to  function  as  a  free 
and  self-sufficient  organization. 

Private  Private  monopoly,  through  the  profit  prin- 

monopoiy          ciple  carrying  with  it,  as  it  eventually  will 

as  power  o        i      ^  control  of  regulatory  effort,  pos- 

taxation  ,  .  . 

without  rep-  sesses  the  power  of  taxation  without  repre- 
sentation. sentation,  a  power  which  no  free  govern- 
ment itself  can  exercise.  Not  only  does  it 
have  this  power  but  it  is  under  every  incentive  that  hu- 
man selfishness  can  offer  to  exercise  it  tyrannically.  No 
degree  of  efficiency  that  it  might  possibly  develop  in  the 
financial  and  industrial  fields  could  possibly  compensate 
for  that  destruction  of  free  society  that  must  necessarily 
result  from  its  existence.  Under  it  an  autocracy  or  at 
best  an  oligarchy  of  wealth  would  exist,  but  anything  ap- 
proaching a  democracy  —  never. 

Private  Private  monopoly  has  no  flag,  no  country. 

monopoly          jt  has  neither  loyalty  nor  allegiance.     Its 
constant  effort  through  an  ever  increasing 


concentration  of  control  of  the  instruments 
of  production  and  distribution  is  to  widen 
its  sphere  of  influence  so  that  the  people  of  every  land 
may  be  brought  under  its  yoke  and  compelled  to  pay  tri- 
bute to  it. 

Examples  of      The  American  railway  systems,  constantly 

monopolistic      appealing  to  the  people  for  more,  are  under 

deep  obligations  to  the  country  for  favors 

deserved  and  undeserved.     If  there  is  any  institution 


178  THE  WAY  OUT 


that  should  be  desirous  of  protecting  the  national  interest 
it  is  they.  It  is  generally  conceded  that  the  need  for  an 
American  merchant  marine  owned  by  the  United  States 
government  is  imperative  —  the  welfare  of  the  country 
demands  it  —  yet  the  fact  is  that  these  systems  of  trans- 
portation have  bound  themselves  under  contract  to  dis- 
criminate against  the  merchant  marine  owned  by  the 
United  States  government  and  in  favor  of  foreign  lines. 

Special  In  a  practical  way  special  privilege  recog- 

priviiege's  nizes  no  social  claim  as  superior  to  its  own 
desire  to  perpetuate  its  strangle  hold  on  the 
whole  world.  Whether  it  be  ruthlessly  co- 
ercing a  sovereign  state  to  change  its  economic  policies, 
as  in  the  case  of  North  Dakota,  or  throwing  an  interna- 
tional "cordon  sanitaire"  around  a  great  nation  to  pre- 
vent the  adoption  of  a  different  economic  system  and  to 
compel  the  recognition  and  protection  of  its  own,  as  in 
the  case  of  Russia,  or  promoting  disorder,  as  in  the  case 
of  Mexico,  it  is  simply  following  the  law  of  its  own  devel- 
opment. 

ignorance  No  one  in  particular  is  to  be  blamed.  It  is 
and  neglect  onjy  y^  soc}ai  cancer  called  into  being  by 


social  incompetence,  ignorance  and  neglect, 
devouring  the  healthy  tissue  of  the  body  politic  and  has- 
tening the  day  when  free  government  and  civilization 
must  make  the  final  choice  between  displacing  private 
monopoly  by  a  more  ethical  economic  system,  or  perish 
themselves.  They  and  it  cannot  both  survive. 

The  inherent      Private  monopoly  in  respect  to  its  power  to 

weakness  of       distribute  the  benefits  arising  from  concen- 

rivate  tration  of  control  and  cooperative  produc- 

tion labors  under  serious  handicaps.     It 

must  keep  its  earnings  to  the  extent  necessary  to  provide 


MONOPOLY  179 


for  its  growth.  It  must  necessarily  vest  the  ownership 
of  its  capital  in  the  hands  of  relatively  a  small  percentage 
of  the  population,  thereby  creating  an  aristocracy  of 
wealth.  It  cannot  reduce  the  price  of  its  products  to  a 
cost  basis,  hence  must  continue  to  exploit  the  public. 

Both  rich  and  It  is  admitted  that  the  economic  develop- 
poor  richer  ment  under  the  profit  principle  has  dis- 


tribute<*    ^at  benefits.    It  is  true  that  the 


are  richer  than  they  ever  were  before, 
but  it  is  equally  true  that  the  poor  are  richer 
than  they  ever  were  before  also,  but  it  is  likewise  true 
that  these  classes,  in  the  matter  of  wealth,  are  wider 
apart  now  than  at  any  former  period  of  history.  It  is 
fair,  too,  to  say  that  the  most  of  the  increase  in  wealth  is 
due  to  invention  and  the  improvement  in  the  machinery 
of  production  and  distribution  made  possible  by  the 
greater  aggregation  of  surplus  capital.  The  fact  that  this 
increase  of  the  sum  of  wealth  has  occurred  under  the 
profit  system  does  not  prove  that  the  credit  for  the 
achievement  of  the  result  is  due  to  this  system,  nor  does 
it  disprove  the  possibility  of  even  better  results  under  a 
more  equitable  system  of  aggregation  having  power  to 
distribute  benefits  more  generally  as  well  as  more  equit- 
ably. 

Public  Public  monopoly  is  the  highest  form  of  co- 

monopoly's        operation.    Its  ownership  is  general.    There 
is  no  preferred  or  privileged  class.     Each 

advantages.  .  MI. 

member  of  society  must  contribute  his  part 
of  the  capital  required,  or  if  the  capital  is  borrowed  the 
interest  charge  is  the  lowest.  The  size  of  the  unit  is  the 
largest  that  economic  efficiency  will  permit,  and  so  far 
as  organization  and  equipment  are  concerned,  the  cost 
of  the  service  should  be  at  the  minimum  rate.  The  man- 


180  THE  WAY  OUT 


agement  is  under  no  compulsion  to  charge  for  the  risk, 
since  if  in  the  effort  to  distribute  at  cost  through  unfavor- 
able circumstance  or  mistaken  judgment  a  loss  should  re- 
sult the  monopoly  can  easily  recoup  itself  by  the  very 
simple  process  of  increasing  the  price  for  the  service. 

If  additional  capital  should  be  required  from  time  to 
time  to  provide  enlarged  facilities  to  accommodate  the 
growth  of  business,  it  can  be  acquired  either  by  charging 
more  than  cost  for  the  service  or  by  means  of  taxation. 
In  either  case  the  people  would  be  furnishing  the  means 
to  conduct  their  own  enterprise  and  their  interest  and 
title  would  remain  the  same.  They,  as  partners  in  this 
social  undertaking,  would  only  have  devoted  so  much  of 
their  capital  to  a  cooperative  enterprise,  the  benefits  of 
which  would  be  enjoyed  by  all.  No  part  of  the  contrib- 
uted capital  would  become  the  property  of  another  indi- 
vidual or  class,  and  therefore  the  operation  would  furnish 
no  opportunity  to  any  member  or  class  of  society  to  get 
rich  at  the  expense  of  someone  else. 

Private  The  accumulation  of  wealth  by  individuals 

accumulation  wou\&  still  take  place,  but  each  of  necessity 
would  be  compelled  to  limit  his  accumula- 
tions to  that  which  he  saved  out  of  his  own 
earnings  as  none  would  have  the  opportunity  to  appropri- 
ate those  of  someone  else.  It  is  highly  probable  that  the 
total  sum  of  national  wealth  would  be  greatly  increased 
but  the  actual  ownership  would  be  vested  in  the  many  in- 
stead of  the  few.  Millionaires  and  multi-millionaires 
under  the  service  system  would  become  as  extinct  as  the 
dodo.  There  would  be  no  legitimate  way  by  which  very 
large  individual  fortunes  could  be  amassed  and  the  pos- 
session of  them,  instead  of  being  an  honorable  distinc- 
tion as  at  present,  would  be  prima  facie  evidence  of  the 
holder's  fitness  for  the  penitentiary. 


MONOPOLY  181 


No  social  After  the  service  system  began  to  function, 

necessity  there    would   be    no    social    necessity    for 

for  large  swollen  fortunes  in  private  hands,  and  their 

fortunes.  ...  f  ,       .       '        , 

existence  could  no  longer  be  justified  upon 
the  only  ground  that  makes  them  tolerable  at  present, 
viz. — held  in  trust  for  the  social  ward  that  so  far  has  not 
developed  sufficient  capacity  to  take  care  of  itself.  If 
society  should  feel  offended  at  the  characterization,  it 
would  do  well  to  appreciate  that  the  reflection,  if  there  is 
any,  inheres  in  the  fact  rather  than  in  the  statement  of  it. 

Public  Public  monopoly  with  the  combined  re- 

monopoly  sources  of  the  nation  to  support  it  is  the 

strongest  economic  organization  that  can  be 
development  gotten  together.  Nothing  that  the  human 

mind  has  so  far  conceived  is  comparable  to 
it  in  this  respect.  Ocular  proof  of  this  fact  is  given  when- 
ever a  nation  has  to  face  a  great  danger  such  as  a  war 
with  some  other  powerful  nation.  It  is  unthinkable  that 
the  nation  would  under  such  circumstances  employ  less 
efficient  instruments,  and  the  fact  that  it  flies  to  adopt 
the  principles  of  public  monopoly  at  such  times  proves  in- 
contestibly  that  its  guiding  spirits  are  thoroughly  con- 
vinced that  the  doctrine  here  set  forth  is  sound  beyond 
question.  If  they  are  not  so  convinced  and  extend  the 
functions  of  government,  believing  that  the  policy  makes 
for  inefficiency,  they  are  guilty  of  giving  aid  and  comfort 
to  the  enemy  and  under  the  laws  of  the  country  should  be 
shot  for  treason. 


The  pressure       It  is  perhaps  nearer  the  truth  to  say  that 
removed,  when  the  entire  nation  is  threatened  with 

toredar*8    common   devastation,    all   classes   for   the 
privilege  nonce  forego  whatever  of  special  privilege 

that  the  necessities  of  the  situation  may  re- 
quire and  cooperate  to  that  extent  for  the  general  good, 


182  THE  WAY  OUT 


but  as  soon  as  the  danger  passes,  the  more  intelligent  in- 
dividuals, who  are  usually  directly  or  indirectly  the  bene- 
ficiaries of  special  privilege  and  who  primarily  initiate 
public  policies,  begin  by  specious  reasoning,  and  mislead- 
ing propaganda  to  tear  down  the  public  service  organiza- 
tion that  necessity  drove  them  to  adopt,  and  reinstall  the 
instrumentalities  that  have  served  so  well  in  the  past  to 
divorce  the  masses  from  their  rightful  earnings. 

Assaults  upon  The  opponents  of  public  function  rarely  at- 
pubiic  admin-  tack  the  principie  but  concentrate  their  as- 
istration.  sault  upon  the  inefficiency  of  public  admin- 

istration. They  are  usually  especially  insistent  that  it  is 
wasteful,  inefficient  and  even  corrupt.  These  objections 
would  indeed  be  exceedingly  forceful  if  they  were  true, 
but  are  they  true  or  are  they  merely  bugbears  to  frighten 
and  beguile  the  simple?  If  the  allegations  are  true  as  re- 
gards public  services  of  the  socialistic  class  (or  such  as 
are  performed  cooperatively  but  paid  for  by  the  individ- 
uals receiving  the  service) ,  why  are  they  not  equally  true 
of  the  purely  communistic  services  performed  coopera- 
tively and  paid  for  by  the  state?  The  only  difference  be- 
tween these  services  is  in  the  source  from  which  the  com- 
n  .  . .  pensation  for  the  service  is  derived.  As  civ- 

Communistic       f,.      ,.  .  ,.  •  ,  •      * 

administration  u12^1011  advances,  the  communistic  func- 
tions of  government  continually  multiply 
and  expand.  The  free  schools,  public  health  activities, 
asylums  for  the  deaf,  dumb,  blind,  epileptic,  infirm, 
crippled,  and  poverty  stricken,  departments  for  research, 
the  promotion  of  agriculture,  manufacture,  and  com- 
merce are  rapidly  assuming  more  and  more  importance, 
yet  from  no  source  does  there  arise  serious  objection.  It 
is  the  exception  to  find  that  mismanagement,  corruption, 
or  fraud  is  charged  against  them,  and  if  such  a  case 
arises  it  receives  summary  treatment  and  correction. 


MONOPOLY  183 


Improvement     Instead  of  these  activities  becoming  a  stench 
in  service          jn  the  nostrils  of  the  public,  the  constant 


tendency  of  their  evolution  is  toward 
cleaner  and  more  efficient  administration.  If  the  mere 
fact  of  government  operation  of  enterprise  must  produce 
the  horrible  conditions  predicted  by  them  who  oppose 
it,  why  do  not  these  communistic  operations  carried  on 
by  the  government  show  these  defects  and  furnish  the 
horrid  examples  that  would  arouse  a  decent  citizenship 
to  demand  that  all  such  undertakings  should  be  taken  out 
of  the  hands  of  the  government  and  turned  over  to  pri- 
vate corporations  to  be  operated  on  the  profit  principle? 
The  answer  is  simple.  The  public  mind  and  conscience, 
quickened  by  the  emotional  nature  that  finds  its  expres- 
sion in  communism,  have  reached  a  degree  of  develop- 
ment that  will  not  permit  private  greed  to  exploit  institu- 
tions intended  to  serve  the  dependent  elements  of  society. 
The  profit  principle  is  not  allowed  to  enter  into  these  do- 
mains and  in  its  exclusion,  the  abuses,  corruption,  and 
fraud  so  glibly  predicted  of  government  operation  are 
also  excluded. 

It  is,  as  has  already  been  observed,  surpassingly 
strange  that  the  supposed  deficiencies  and  dangers  of 
government  operation  are  only  to  be  expected  from  those 
services  which  private  parties  can  make  vehicles  for  pri- 
vate profit.  If  half  of  the  charges  which  the 
The  opponents  Opp0nents  Of  government  operation  bring 

of  government  .      ,    ..  .  i  „ 

operation  against  it  are  true,  the  quickest  as  well  as 
inconsistent.  the  surest  way  to  settle  the  matter  for  all 
time  would  be  to  demonstrate  the  truth  of 
them  by  a  fair  trial  of  the  operation.  When  this  is  pro- 
posed as  to  any  specific  service,  these  prophets  of  evil, 
trembling  for  the  public  safety,  shift  their  position  and 


184  THE  WAY  OUT 


inquire  if  this  particular  thing  is  done,  where  will  it  stop? 
The  more  intelligent  and  therefore  the  leading  class  of 
objectors  to  the  extension  of  government  function,  it  is  to 
be  feared,  is  composed  of  lineal  descendants  of  the  copper- 
smith family,  who  lauded  Diana  of  the  Ephesians  not  so 
much  because  of  their  devotion  to  the  goddess,  as  for  the 
more  practical  reason  that  her  worship  had  a  stimulating 
and  sustaining  effect  upon  the  shrine  market. 

Progress  by  The  progress  of  civilization  has  largely  re- 
empiricism,  suited  from  empirical  effort.  Man  learns 
more  rapidly  and  more  thoroughly  in  the  school  of  experi- 
ence than  anywhere  else,  and  it  does  seem  that  those  who 
are  so  deeply  convinced  that  the  highest  possible  develop- 
ment of  the  cooperative  principle,  which  necessarily  ex- 
presses itself  in  government  operation,  is  fraught  with  so 
much  evil,  could  not  do  a  better  service  than  to  assist  in 
bringing  the  matter  to  a  practical  demonstration  and 
proving  their  contention  to  the  satisfaction  of  all.  Their 
unalterable  and  implacable  opposition  to 
Such  a  course  raises  a  question  of  good  faith, 
of  anc*  ^gg68^8  that  their  opposition  may  be 
fear  it  might  prompted  by  a  fear  that  the  experiment 
succeed.  would  succeed  rather  than  by  a  desire  to 

shield  society  from  the  evils  that  they  claim 
to  believe  would  result  from  its  trial  and  failure. 

Happily,  the  case  for  the  full  evolution  is  not  so  des- 
perate as  to  be  compelled  to  rely  upon  theory  alone  to 
sustain  it.  Owing  to  the  slow  rate  at  which  economic 
evolution  has  proceeded  in  past  ages,  due  in  large  meas- 
ure to  lack  of  means  for  rapid  transportation  of  persons 
and  products  and  quick  transmission  of  intelligence, 
highly  organized  industry  and  commerce  were  impos- 


MONOPOLY  185 


sible,  but  with  the  advent  of  invention  the 
evolution  was  speeded  up,  and  the  rate  of 
forward  by        progress  within  the  last  half  century  has 
invention.         been  accelerated  more  than  in  all  the  centu- 
ries of  the  past. 

Cooperative  development  has  met  less  opposition  in 
communistic  lines  than  in  other  things,  hence  has  passed 
more  rapidly  through  the  stage  of  private  initiative  into 
that  of  public  operation,  but  in  all  services  from  which 
capitalism  could  exact  tribute,  the  most  strenuous  and  de- 
termined effort  has  unremittingly  been  made  to  throw  ob- 
structions across  the  channels  of  evolution- 
The  effect  of  ...  . 

opposition  ar^  Pr°gress>  with  the  result  that  the  intro- 
duction of  public  ownership  and  operation 
has  been  greatly  retarded.  The  effect  has  been  to  dam  up 
the  stream,  so  to  speak,  and  amass  a  great  force  that 
must  at  sometime  overcome  the  resistance  and  sweep  on 
to  its  ultimate  objective  but  the  faster  for  having  been 
unduly  delayed. 

Porces  of  The  forces  of  reaction,  exert  themselves  as 

reaction  ^y  coui(^  have  not  been  able  to  hold  every- 

evolution.  ,.,rf    , 

utility  has  managed  to  find  its  way  into  the 
forbidden  field  of  public  enterprise.  The  results  have  not 
been  so  frightful  as  to  deter  others  from  undertaking 
similar  adventures  nor  to  stop  the  tide  of  public  opinion 
in  its  steady  but  resistless  march  onward.  It  is  no  doubt 
true  that  some  of  these  experiments  for  various  reasons 
have  not  been  satisfactory,  but  it  is  perhaps  doubly  true 
that  a  far  smaller  percentage  of  the  total  number  of  the 
public  undertakings  launched  have  failed  than  of  those 
undertaken  by  private  parties.  A  very  large  percentage 
of  all  the  railroads  and  large  public  utility  companies  of 


186  THE  WAY  OUT 


the  country  at  some  time  in  their  history  have  broken 
down,  passed  through  the  hands  of  receivers  and  reor- 
ganized. 

The  death  if  the  death  rate  of  public  ventures  was  one 
rate  of  public  tenth  as  high  as  that  of  private  enterprises, 
rrtu*les.les/  the  figures  would  be  paraded  as  indisput- 

than  that  of  ,  ,       3  .  ,  *V  .. 

private  a^e  evldence  that  government  ownership 

and  operation  were  hopeless  failures,  and 
that  no  body  of  people  outside  of  insane  asylums  would 
seriously  contemplate  adopting  a  system  so  thoroughly 
discredited  by  actual  test. 

steady  Notwithstanding  the  strenuous  efforts  of 

growth  of          the  beneficiaries  of  the  profit  system  to  pre- 
f  (       vent  the  growth  of  public  opinion  favorable 


ownership  *°  Public  ownership,  it  is  slowly  but  surely 
becoming  more  widespread,  and  here  and 
there  has  translated  itself  into  action.  These  public  un- 
dertakings may  be  regarded  as  the  advance  agents  of  the 
many  that  are  to  follow  as  general  intelligence  increases 
and  the  civic  conscience  is  quickened  by  the  increasing 
pressure  of  economic  necessity.  The  cities  have  made 
greater  progress  than  the  states  or  nations  in  taking  over 
their  public  utilities.  Water,  light,  heat,  gas,  street  cars, 
and  perhaps  other  utilities,  have  been  acquired  and  oper- 
ated by  cities  and  the  practice  is  growing.  Nowhere  are 
there  noticeable  signs  of  recession. 

state  The  field  for  action  by  the  individual  states 

opportunity  js  somewhat  restricted  in  that  the  most  of 
the  units  with  which  they  would  be  expected 
to  deal  have  become  national  and  even  international  in 
their  scope.  Only  the  national  government  could  com- 
mand sufficient  resources  and  power  to  operate  efficiently 


MONOPOLY  187 


: 


the  giant  combines  and  monopolies  that  not  only  reach 
every  corner  of  this  country  but  are  rapidly  extending 
their  spheres  of  operation  to  all  parts  of  the  earth. 

General  It  cannot  be  said  that  the  general  govern- 

government's     ment  has  made  much  progress  in  this  par- 
PrXtefaV01       ticular  field-     li  has  greatly  extended  the 
monopoly          scope  of  its  activities  but  has  confined  them 
largely  to  the  effort  of  assisting  the  develop- 
ment of  private  monopoly  rather  than  building  up  an  or- 
ganization of  its  own  to  give  better  public  service.    It  has 
gone  to  unreasonble  lengths  to  foster  railroads  in  private 
hands,  and  it  has  abdicated  its  constitutional  place  as  the 
agency  for  furnishing  a  banking  and  currency  system  in 
favor  of  the  so-called  Federal  Reserve  and  National 
Banks,  which  are  not  national  in  any  true  sense  but  only 
private  institutions  chartered  by  the  Federal  government 
on  the  assumption  that  they  are  assisting 
the  government  in  the  performance  of  a 
public  function.    They  are  not  public  service 

Reserve  and  ...  .     ,    .  . ^       .  .  , 

National  institutions  but  instruments  by  which  spe- 

Banks.  cial  privilege  lays  and  collects  tribute  from 

the  public.    Profit  is  their  principal  object 
and  service  to  the  public  the  incident. 

The  great  world  war  was  fought  ostensibly  to  make  the 
world  safe  for  democracy,  and  in  some  notable  cases  it  is 
suspected  that  in  order  to  make  democracy  doubly  safe 
some  of  its  most  earnest  exponents  who  had  committed  no 
overt  acts  were  put  in  jail  for  the  expression  of  honest 
opinion,  and  all  of  them  more  or  less  intimidated.  While 
this  altruistic  war  was  being  fought  and  since  its  close, 
special  privilege  has  made  greater  strides  than  in  any 
similar  length  of  time  since  the  eviction  of  our  great 
grandparents  from  the  bowers  of  Eden. 


188  THE  WAY  OUT 


The  need  of  Before  the  war  the  commercial  flag  of 
a  merchant  America  was  somewhat  of  a  curiosity  in  the 

harbors  of  the  world.  America's  interest 
in  ocean  traffic  was  confined  to  international  traders  and 
bankers  of  American  citizenship  who  had  become  inter- 
ested in  foreign  merchant  marines.  This  country  was 
almost  entirely  dependent  upon  foreign  bottoms  for  the 
means  of  ocean  transportation.  The  destructive  work  of 
the  submarine  drove  the  government  to  build  merchant 
ships,  and  sums  variously  estimated  from  three  to  four 
billion  dollars  were  spent  for  this  purpose.  The  need  for 
this  merchant  marine  in  time  of  peace,  no  less  than  in 
war,  was  urgent.  Being  an  exporting  country,  every  con- 
sideration of  national  welfare  demanded  that  there 
should  be  a  merchant  marine  that  could  carry  its  exports 
and  bring  its  imports  at  the  lowest  possible  costs,  so  as  to 
enable  the  country  to  exchange  its  goods  with  other  na- 
tions under  the  most  favorable  conditions,  yet  with  all 
these  facts  and  reasons  open  to  them,  both  the  legislative 
and  executive  branches  of  the  government  concurred  in 
spending  these  enormous  sums  of  the  people's  money  to 

build  a  merchant  marine  with  the  avowed 

purpose  of  surrendering  it  as  soon  as  the 
trust  l  urgent  necessity  that  caused  them  to  build 

it  had  passed,  to  private  interests  which 
could  not  be  other  than  international  private  monopo- 
lists !  Was  there  ever  before  in  all  history  so  bounteous 
an  offering  placed  upon  the  altar  of  the  Moloch  of  organ- 
ized greed?  At  what  prices  were  these  ships  to  be  sold 
to  private  interests?  Billions  less  than  they  cost.  What 
were  the  shameful  and  shameless  acts  of  the  administra- 
tion of  the  whole  affair?  A  congressional  committee 
lately  unanimously  refused  to  recommend  an  investiga- 
tion, certainly  not  for  the  reason  that  there  was  no  need 


MONOPOLY  189 


for  it.  The  true  history  of  the  sordid  and  criminal  trans- 
actions connected  with  the  affair  will  not  likely  be  pub- 
lished, but  enough  is  known  to  cast  a  lasting  reflection 
upon  the  vision  and  patriotism  of  those  who  were  respon- 
sible for  the  public  policy  involved,  and  to  pillory  some 
who  were  guilty  of  rank  betrayal  of  public  trust.  The 
building  of  this  great  government  merchant  fleet  fur- 
nished the  opportunity  for  organizing  and  operating  a 
great  international  service,  the  benefits  of  which  would 
have  followed  America's  trade  into  every  country.  Fu- 
ture generations  will  look  back  upon  this  lost  opportunity 
as  marking  the  acme  of  evil  accomplishment  on  the  part 
of  the  spirit  of  capitalism,  which  beclouded  the  vision  and 
unbalanced  the  judgment  of  those  whose 
Capitalistic  sacred  duty  it  was  to  guard  the  public  inter- 

f  atahty  and  ...  ,,.F 

obsession  est-    ^n  an  evl^  hour  the  public  guardians 

slept  at  their  posts.  Even  now  it  is  not  too 
late  to  gather  from  the  ruins  enough  to  establish  a  na- 
tional merchant  marine  that  could  be  made  one  of  the 
country's  most  valuable  assets,  but  alas,  there  is  none 
whose  voice  is  sufficiently  strong  to  arrest  the  attention 
of  a  nation  that  is  obsessed  with  an  insane  desire  to  pre- 
serve at  all  hazards  the  opportunity  to  prey.  Dominated 
by  the  spirit  of  capitalism  it  madly  rushes  on,  hugging  a 
delusion  that  time  and  circumstance  in  the  appointed 
time  will  inevitably  dissipate. 

Parcel  post  Under  pressure  from  agrarian  interests  the 
opposed.  Federal  government  put  the  parcel  post  into 

operation.  This  was  done  against  the  solid  protests  of 
the  commercial  elements.  These  classes  protested  that 
such  a  method  of  distribution  would  be  fatal  to  the  or- 
derly progress  and  success  of  so-called  private  business. 
The  system  has  been  purposely  restricted  to  prevent  its 


190  THE  WAY  OUT 


growth,  but  even  under  this  handicap  the 
very  people  who  protested  most  have  come  to 
restricted  realize  that  its  effects  are  beneficial,  and 
while  it  is  only  a  mere  skeleton  of  what  it 
might  have  been,  there  is  none  who  would  now  dare  pro- 
pose its  abolition.  This  being  true,  one  would  suppose 
that  public  clamor  would  compel  the  extension  of  the 
service  so  that  the  highest  possible  efficiency  and  the  most 
general  benefit  might  be  realized,  but  not  so.  The  masses 
seem  satisfied  to  let  the  system  remain  in  a  state  of  ar- 
rested development,  illustrating  the  fact  that  the  public 
will  keep  as  much  of  a  service  system  as  time,  chance,  and 
economic  necessity  may  ram  down  their  throats,  but  are 
as  yet  lacking  in  the  requisite  initiative  to  extend  the  ap- 
plication of  a  principle  even  after  its  application  has  fully 
demonstrated  its  practicability  and  worth. 

The  zone  During  the  introductory  stages  of  parcel 

system.  pOS^  ^e  zone  SyStem  of  charges  was  inaugu- 

rated, under  which  the  rates  in  close  zones  were  made 
sufficiently  reasonable  to  permit  traffic  while  in  the  more 
distant  they  were  sufficiently  high  to  drive  the  business 
to  the  express  companies.  The  explanation  oftenest 
heard  at  that  time  was  that  the  policy  was  to  restrict  the 
volume  of  business  coming  to  the  parcel  post  system  be- 
cause the  government  had  not  yet  had  time  to  develop 
sufficient  organization  to  take  care  of  it.  Although  many 
winters  have  passed  since  that  time,  yet  the  same  policy 
is  adhered  to.  Is  it  still  the  purpose  to  force  patronage  to 
the  express  companies  and  if  so,  why?  The 

Why  not  let  ,  ,         ,    '        J 

it  grow?  parcel  post  system  should  make  its  rates  to 

cover  cost  and  provide  whatever  organiza- 
tion that  might  be  necessary  to  take  care  of  the  business 
that  came  to  it.  Less  than  this  is  unjust  to  the  public 


MONOPOLY  191 


service  principle  and  must  have  the  effect  of  fostering 
special  privilege  at  the  public's  expense. 

Socialistic  Social  activities  falling  in  the  socialistic 
activities.  c}ass  are  those  which  employ  cooperative 
method  on  the  productive  side  and  distribute  benefits  in- 
dividualistically,  i.  e.,  return  to  the  individual  a  just 
equivalent  for  that  which  he  contributes.  This  is  Social- 
ism. All  business  under  private  initiative  operated  cap- 
italistically  conforms  to  the  socialistic  method,  and  in  so 
far  as  its  claims  to  pay  a  just  wage  and  sell  its  wares  and 
services  at  a  fair  price  are  justified  by  fact  it  is  Social- 
ism. It  has  already  been  shown,  however,  that  it  cannot 
make  good  its  claims  and  live  under  Capitalism.  The 
point  is  now  that  capitalistic  business  is  private  Social- 
ism, which  on  account  of  its  inherent  defects  must  of  ne- 
cessity bestow  the  greater  part  of  the  benefits  upon  the 
few. 

Private  The  question  is  not  whether  there  shall  be 

Socialism  Socialism   or  non-Socialism,   but  whether 

there  shall  be  private  Socialism  for  the  ben- 
which?  ^  °^  the  few  or  public  Socialism  for  the 

benefit  of  the  many.     Private   Socialism 
creates  class  divisions,  putting  the  overlord  on  one  side 
and  his  dependents  on  the  other,  the  first  receiving  the 
lion's  share  and  the  latter  taking  what  is  left.     Public 
Socialism  demands  that  all  shall  be  fellow-servants  co- 
operating for  the  public  good,  and  that  each  shall  receive 
his  fair  share  of  the  benefits  based  upon  his  own  contri- 
bution.   Socialism,  then,  is  inescapable.    It 
|a  *SI  is  already  established  and  can  only  be  dis- 

established       placed  by  the  substitution  of  actual  anarchy 
or  thoroughgoing  Communism  in  all  social 
relations.    However  desirable  these  may  be  in  their  par- 


192  THE  WAY  OUT 


ticular  spheres,  either  of  them  is  utterly  unthinkable,  not 
to  say  impossible,  as  a  general  social  policy.  Socialism, 
then,  society  must  have  in  the  sphere  to  which  it  is 
adapted,  and  the  only  thing  open  to  discussion  and  choice 
is  whether  it  shall  be  under  private  or  public  initiative — 
whether  selfish  greed  shall  dominate  it,  or  it  shall  func- 
tion in  accord  with  the  service  principle. 

As  already  indicated,  the  movement  toward  public 
initiative  has  been  very  slow.  Especially  is  this  true  of 
the  larger  national  and  international  units  of  production 
and  distribution.  While  greater  progress  has  been  made 
in  this  direction  in  some  other  countries,  in  the  United 

States  the  postoffice  department  is  the  only 
department  thing  of  this  character  that  may  be  said  to 

have  developed  normally  under  public  initi- 
ative. This  is  possibly  due  to  the  fact  that  it  was  intro- 
duced in  the  formative  period  of  the  nation's  history  long 
before  its  capabilities  for  exploitation  were  even  sus- 
pected, much  less  appreciated  by  capitalistically-minded 
profit  mongers.  Its  early  birth  accounts  for  its  length  of 
life.  It  became  a  fixture,  an  institution  too  well  known 
to  be  taken  from  the  public  without  their  knowledge.  It 
was  quite  common,  however,  in  the  past,  before  so  much 
of  the  inefficiency  and  integral  rottenness  of  railroads 
and  express  companies  had  been  exposed,  to  hear  the 
opinion  expressed  that  the  postoffice  in  private  hands 
would  show  great  improvement  over  government  opera- 
tion. That  the  postal  administration  could  be  greatly  im- 
proved is  readily  conceivable,  but  that  it  is  in  all  respects 
ahead  of  any  private  operation  of  similar  magnitude  is 
not  to  be  doubted. 


MONOPOLY  193 


Arguments        When  the  extension  of  the  functions  of  gov- 
against  ernment  is  proposed,  the  objection  is  usually 

Colerm*nt       urged  that  maladministration  and  political 

corruption  would  superinduce  inefficiency  to 

a  degree  that  would  overbalance  whatever 

of  benefit  that  the  superior  principles  involved  might 

make  possible.    The  past  history  and  present  state  of  the 

postoffice  department  furnish  the  best  example  of  the 

practical  application  of  the  service  principle,  as  well  as 

the  surest  standard  by  which  a  correct  judgment  of  the 

force  and  truth  of  the  objections  urged  can  be  reached. 

The  post  office     The  postal  system  was  inaugurated  more 
public  th^  a  century  ago.    It  has  been  in  continu- 


ous operation  since  it  was  started  and  it  has 
had  time  and  opportunity  to  develop  its  strong  points  and 
expose  its  weaknesses.  It  began  when  social  cooperation 
was  at  a  low  ebb  and  has  come  up  through  a  period  of 
rapid  socialization  under  private  initiative,  and  therefore 
offers  as  nothing  else  that  is  nation-wide  in  its  scope  does, 
the  example  of  what  Socialism  under  public  initiative  will 
do  if  given  a  fair  chance  to  evolve  according  to  the  prin- 
ciples that  govern  its  development. 

Jefferson's  Thomas  Jefferson,  writing  to  either  Madi- 
distrust  of  son  or  Monroe  prior  to  the  beginning  of  the 
,1  system.  nineteenth  century,  said  that  he  kept  the 
letters  by  him  for  three  weeks  waiting  to  get  some  friend 
to  bring  them,  because  the  post  office  officials  had  been 
opening  his  letters,  publishing  the  contents  in  the  news- 
papers. To-day,  the  highest  and  the  lowest  alike  entrust 
their  correspondence  to  this  agency  with  never  a  doubt 
that  it  will  be  carried  to  its  destination  and  safely  deliv- 
ered to  those  to  whom  it  is  sent. 


13 


194  THE  WAY  OUT 


Postal  The  postal  system  had  its  inception  in  ineffi- 

history  its  ciency,  disorganization,  and  corruption,  and 
best  witness.  hag  s^ea(j}iy  grown  in  capacity  for  service, 
in  degree  of  efficiency  and  in  moral  tone,  and  stands 
easily  at  the  head  of  large  agencies  designed  to  do  public 
service.  Although  it  has  constantly  increased  the  number 
of  its  employees,  the  difficulties  and  disturbances  incident 
to  adjusting  differences  between  employers  and  em- 
ployees have  not  resulted.  A  general  tie-up  of  its  opera- 
tion by  labor  unions  or  even  a  threat  of  it  would  no  more 
be  expected  than  any  other  unheard-of  happening.  It  has 
never  shown  any  signs  of  desiring  to  impose  unreasonable 
rates  upon  the  public  it  serves,  but,  on  the  contrary,  has 
constantly  extended  its  service  and  steadily  reduced  its 
charges.  During  the  great  war  it  advanced  the  rate  of 
postage  fifty  per  cent  as  against  one  hundred  per  cent  to 
many  hundreds  per  cent  by  private  enterprise,  but  imme- 
diately after  the  war  it  reinstated  the  prewar  price.  Its 
history  is  an  effort  to  give  all  the  service  possible,  making 
the  least  charge  consistent  with  the  cost  of  it.  It  has  not 
found  it  necessary  to  pay  exorbitant  returns  to  a  pre- 
ferred class  and  therefore  has  never  made  in  all  its  his- 
tory a  single  millionaire.  If  anyone  should  succeed  in 
getting  a  million  out  of  the  post  office  business  the  chances 
are  good  that  he  would  have  time  to  regret  it  while  serv- 
ing his  term  in  some  Federal  penitentiary. 

Private  Here  may  be  noted  the  striking  difference 

and  public  between  Socialism  under  private  initiative 
Socialism  and  Socialism  under  public  initiative.  The 

contrasted.  ~  ,   .      ,,  «  .   ,        .    . 

first,  used  in  the  interest  of  special  privi- 
lege, demands  that  the  few  shall  gather  more  than  they 
have  a  right  to,  and  the  degree  of  their  success  is  deter- 
mined by  the  amount  they  have  abstracted  from  the  pub- 
lic, while  under  the  latter  service  alone  is  the  test  of  sue- 


MONOPOLY 


195 


cess  and  any  accumulation  by  the  individual  above  what 
a  just  wage  would  make  possible  would  arouse  suspicion 
and  invite  searching  enquiry  as  to  the  source  from  which 
it  was  derived.  In  other  words,  under  private  Socialism 
the  managers  of  the  postal  system  would  be  expected  to 
take  millions  from  the  people  and  would  be  much  re- 
spected if  they  succeeded  in  doing  so,  but  under  public 
Socialism  if  these  same  managers,  doing  the  same  public 
service,  took  the  same  amount  from  the  same  public  they 
would  be  considered  thieves  and  robbers  and  would  be 
straightway  sent  to  penal  institutions,  there  to  grow  pre- 
maturely old  in  the  effort  to  unravel  the  hitherto  unex- 
plained mystery  why  it  is  creditable  to  despoil  the  public 
by  one  method  and  damnable  to  do  the  same  thing  by  a 
different  method. 


Public  The  postal  system  is  a  department  of  gov- 

functionnot       ernment,  and  if  political  corruption  must 

result  from  government  ownership  and  op- 
corruption.  .,      p..  ...  Twiu 
eration,  it  could  not  possibly  escape.    With 

more  than  a  century  of  history  it  should  surely  exhibit 
by  this  time  enough  of  such  evil  effects  to  make  of  it  a 
horrible  example — a  veritable  stench  in  the  nostrils  of  all 
good  citizens. 


ivate 
Socialism  a 
direct  cause 
of  corruption. 


Every  private  interest  of  any  magnitude 
and  all  class  interests  have  their  lobbyists 
on  guard  either  to  prevent  unfavorable  leg- 
islation or  to  promote  that  which  they  re- 
gard as  favorable.  If  half  that  is  told  of  them  be  true, 
their  efforts  are  not  always  restricted  to  proper  methods 
but  they  promote  their  purposes  by  bringing  to  bear  the 
most  powerful  influences  they  can  command.  Not  only 
do  they  undertake  to  influence  legislation  at  the  Capital, 
but  they  start  at  the  source  by  influencing  the  public 


196  THE  WAY  OUT 


through  propaganda  and  by  shaping  the  policies  to  be  put 
forward  in  party  platforms.  Private  Socialism  is  always 
up  to  its  ears  in  politics  because  its  life  depends  upon  its 
ability  to  preserve  the  privilege  of  levying  tribute. 

Public  Not  so  with  public  Socialism  and  its  best  ex- 

Socialism  ample,  the  postal  system,  as  it  can  function 
does  not  successfully  without  resorting  to  these  de- 

oKti°Pi  vious  and  doubtful  practices.    It  is  there- 

power.  ^ore  n°t  difficult  to  understand  why  this 

system  has  never  used  its  power  to  elect  a 
United  States  senator,  while  it  requires  no  stretch  of  the 
imagination  to  believe  that  private  Socialism  has  left  no 
stone  unturned  to  fill  every  position  from  the  United 
States  Supreme  Court,  the  Presidency  and  Congress 
down  to  the  local  magistracy  with  its  friends  whenever 
it  was  possible  to  do  so.  Even  when  no  corruption  is  in- 
volved, and  corruption  is  not  here  intimated,  the  point  of 
view  —  the  bias  of  mind  —  is  vitally  important. 

The  constant  tendency  of  the  postal  system  has  been 
to  get  farther  away  from  politics.  A  quarter  of  a  century 
ago  the  fourth  class  postmaster  was  the  leading  political 
henchman  in  his  vicinity  of  the  party  in  power,  but  now 
none  is  so  poor  as  to  do  him  political  reverence.  No  one 
cares  what  he  may  think  or  do  in  a  political  way. 

Unaccountable  The  strange  and  unaccountable  thing  is  that 
public  y^  great  system  functioning  on  the  service 


obtuseness.  principle,  covering  the  entire  country,  going 
into  every  hamlet  and  bypath,  rendering  a  highly  accept- 
able and  satisfactory  service  to  all  at  most  reasonable 
rates,  has  not  educated  the  people  to  a  better  understand- 
ing of  the  principle  and  caused  a  more  general  demand 
for  the  extension  of  it  to  other  services.  It  is  no  compli- 
ment to  the  intelligence  and  initiative  of  the  average  cit- 


, 


MONOPOLY  197 


izen  that  it  has  not  done  so.  It  indicates  at  least  that  the 
power  of  the  masses  to  make  correct  inductions  from 
known  effects,  if  it  exists  at  all,  is  as  yet  in  a  low  state  of 
development. 

The  public's       The  failure  of  the  general  public,  who  would 
be  the  beneficiaries,  to  initiate  movements 
to  increase  public  functions  is  additional 
evidence  that  the  capacity  to  originate  and  initiate  is 
peculiarly  reserved  to  the  few.    The  masses  are  incapable 
of  it  and  will  perhaps  always  remain  so.    They  are  de- 
pendent upon  leadership  for  suggestion  and  guidance. 
This  being  true,  shall  it  not  be  concluded  that  democracy, 
a  government  of,  by,  and  for  the  people  is 

Is  democracy  .  .,  .,.,    0 'J  mi  , 

possible?  an  impossibility :  By  no  means.  The  people 

need  leaders  but  these  in  turn  need  follow- 
ers, and  the  greatest  present  need  is  for  intelligent  fol- 
lowers, whose  chief  and  all-important  tasks  are  to  select 
leaders  and  to  veto  results  when  the  latter  may  prove  un- 
satisfactory. This  power  to  negative  the  unsatisfactory 
results  of  leadership  is  by  far  the  more  important,  and 
as  long  as  the  people  retain  this  power  there  is  hope  of 
orderly  democratic  progress.  Once  it  is  lost,  the  masses 
become  slaves. 

The  masses  Admittedly  the  masses  have  not  the  under- 
lack  standing  of  principles,  the  well  balanced 

Jud^ment  and  inventive  faculty  to  devise 
new  methods.    Once  invade  the  field  of  ab- 
stractions and  they  are  helpless  and  hopeless,  but  when 
the  theorists  have  reduced  their  propositions  to  the  con- 
crete, put  them  into  every-day  practice,  the 
masses  are  the  most  correct  judges  of  ef- 

of  effects^8       fects,  and  as  l°ng  as  they  find  an  effective 

way  to  register  their  will,  once  having  tested 

the  matter  by  experience,  social  safety  is  assured.    De- 


198 


THE  WAY  OUT 


mocracy  properly  organized  gives  freedom  of  action  both 
to  the  initiatory  and  veto  powers — each  equally  necessary 
in  its  respective  sphere.  As  long  as  they  cooperate  the 
ship  of  state  is  reasonably  safe.  Arbitrary  government 
lacks  the  corrective,  conserving  influence  of  the  public's 
veto  power,  and  mob  government  lacks  intelligent  leader- 
ship, hence  under  neither  form  can  permanent  social  pro- 
gress be  reasonably  expected. 


CHAPTER  XI. 

CURRENCY  AND  BANK  CREDIT. 

Barter  Naturally  the  first  method  of  exchange  was 

dependent  on  barter.  The  extent  of  this  interchange  of 
transportation.  products  was  governed  by  the  facilities  for 
transportation.  The  practice  of  exchanging  the  bulkier 
products  for  those  of  less  weight  and  more  value,  in  order 
to  use  the  latter  as  media  of  exchange,  doubtless  owed  its 
origin  to  the  effort  to  remove  the  necessity  for  transport- 
ing the  heavier  and  more  bulky  articles,  when  they  could 
be  obtained  nearer  the  point  of  need  simply  by  exchang- 
ing the  lighter  and  more  precious  articles  for  them. 

Precious  The  finer  metals  and  precious  stones  were 

metals  and  ^es^  adapted  to  this  purpose,  requiring  of 
course  some  assurance  of  their  actual  con- 
tents and  degree  of  fineness.  In  the  course 
of  this  refined  barter — and  the  use  of  material  substance 
having  in  itself  the  value  for  which  it  is  exchanged  is  of 
necessity  barter — some  acceptable  authority,  if  requisite 
confidence  is  to  be  given,  must  become  sponsor  for  the 
weight  and  fineness  of  these  instruments  of  exchange  by 
barter.  Otherwise  the  faith  necessary  to  the  efficient  con- 
duct of  the  exchange  operations  would  be  lacking. 

Government       The  recognition  of  this  need  led  to  various 

certification       methods  of  having  the  metals  intended  for 

i  weight  and     uge  -n  excfoange  bear  evidence  of  their  own 

fineness.  ^ 

character  and  contents.  By  a  process  of 
elimination  governments  finally  became  the  agencies  for 
performing  this  very  necessary  service. 

199 


200  THE  WAY  OUT 


Gold  coin  The  American  gold  dollar  is  only  a  piece  of 
barter.  g0ift  an(j  the  stamp  of  the  United  States  gov- 

ernment simple  certifies  that  it  contains  23.22  grains  of 
pure  gold,  is  nine-tenths  fine  and  weighs  with  the  alloy 
25.8  grains.  The  fact  that  the  gold  dollar  is  of  a  given 
weight  and  fineness  and  is  presumed  to  equal  the  value 
of  the  American  unit  of  value  called  the  dollar,  does  not 
of  itself  change  the  character  of  the  gold,  which  remains 
a  commodity  and  an  article  of  barter. 

Payment  in  it  is  obvious  that  payment  in  gold  is  not  dif- 
goidnot  ferent  from  payment  in  wheat,  corn,  iron, 

dfmentin0m  or  any  other  material  substance.  This  use 
other  °^  ^e  finer  metals  as  media  of  exchange,  or 

products.  to  express  it  differently,  this  bartering  of 

heavier  commodities  for  the  lighter,  not  for 
possession  and  consumptive  use  of  the  latter  themselves 
but  merely  for  use  as  a  means  of  economy  in  transporta- 
tion, making  possible  the  bartering  of  bulky  and  weighty 
commodities  with  greater  ease  and  facility,  has  given  rise 
to  the  mistaken  opinion  that  they  are  money,  or  repre- 
sentatives of  value  in  a  system  of  exchange  in  which  mere 
evidences  of  title  of  value  pass  current  and  which  are  con- 
vertible on  demand  into  material  or  real  value. 

Gold  no  This  use  of  gold  does  not  entitle  it  to  be  con- 

proper  sidered  as  forming  any  element  of  a  proper 

element  m         system  of  credit  exchange,  because  barter 

credit  .  T  -         j'      T,    . 

involves  no  element  of  credit.  It,  in  common 

excnange,  .  . 

parlance,  is  swapping  one  commodity  for 
another  and  it  in  no  wise  changes  the  character  of  the 
transaction  if  gold  should  be  one  of  the  products  ex- 
changed. 

It  is  of  course  understood  that  a  coin  whose  metal  con- 
tents are  worth  less  than  its  exchange  value  but  which 


CURRENCY  AND  BANK  CREDIT 201 

exchanges  for  a  greater  value  merely  because  a  govern- 
ment guarantees  its  redemption  at  its  ex- 
Token  money.      ,  .£  j  ., 
change  value  has  a  composite  value,  and  its 

use  involves  barter,  to  the  extent  of  the  commodity  value, 
and  credit  exchange  value  for  the  balance.  The  employ- 
ment of  the  two  different  principles  of  exchange  in  a 
given  case  adds  no  value  to  the  actual  product  further 
than  that  the  practice  may  enlarge  the  use  of  the  metal 
for  such  purpose. 

Circulatory  If  the  silver  in  a  silver  dollar  has  a  corn- 
value  and  modity  value  of  fifty  cents  it  would  circu- 

v°aiu*  late  at  par  with  gold  as  long  as  the  govern" 

ment  guarantee  of  dollar  value  was  ac- 
cepted, but  let  revolution  destroy  faith  in  this  guarantee 
and  the  silver  dollar  would  at  once  fall  to  its  commodity 
value. 

Confidence  The  value  of  credit  exchange  depends  en- 
and  faith  tirely  upon  faith  and  confidence.  Belief  in 
give  value  th  abftfty  an(j  purpose  of  the  emitters  of 

to  credit  ...  \    . ^         .,  7 

exchange          credit  exchange  to  have  it  redeemed  on  de- 
mand is  an  indispensable  condition  to  the 
successful  and  efficient  operation  of  any  system  of  credit 
exchange. 

Currency  and  Discarding  for  the  sake  of  clarity  all  forms 
bank  credit.  Of  barter,  however  refined,  whether  the  ma- 
terials are  used  as  media  of  exchange  or  not,  the  currency 
and  bank  credit  system  will  be  considered  as  one  which 
employs  purely  representative  or  intangible  values  to 
stand  for  material  values,  into  which  these  representa- 
tive values  can  be  transformed  at  will  by  the  holders. 
When  this  conversion  takes  place,  it  automatically  liqui- 
dates and  retires  the  credit  instrument.  Credit  exchange 
after  all  is  but  the  shadow  of  the  product  put  into  the 


202  THE  WAY  OUT 


market,  therefore  there  is  a  parity  at  all  times  between 
the  values  of  the  products  in  process  of  exchange  and 
those  of  the  outstanding  credit  instruments  that  repre- 
sent them.  It  is  for  this  reason  that  any  arbitrary  en- 
hancement in  the  nominal  values  of  credit  instruments 
will  produce  a  like  increase  in  the  prices  of  products 
and  make  necessary  a  readjustment,  which  after  comple- 
tion results  only  in  counting  in  higher  numbers.  This  is 
inflation  and  the  reverse  of  the  process  is  deflation. 

standard  of  In  a  system  of  credit  exchange  there  must 
value.  ke  a  standard  of  value — a  common  denomi- 

nator of  values  into  which  all  credit  values  may  be  trans- 
lated, thus  establishing  the  ratio  of  the  value  measured 
to  the  unit  of  the  standard  of  representative  value.  By 
means  of  this  process  all  representative  values  and  the 
ratios  of  products  to  each  other  may  be  established.  In 
products,  the  standard  is  the  unit  into  which  concrete 
substances  are  divided  such  as  pounds,  feet,  bushels,  etc. 
The  enumeration  of  the  number  of  these  units  conveys 
only  the  idea  of  either  weight,  length,  contents,  etc.  It 
gives  no  indication  whatever  of  value. 

Value  an  The  idea  of  value  is  abstract.    It  has  neither 

abstract  idea,  length,  breadth,  nor  thickness.  It  is  the 
measure  of  the  intensity  and  extent  of  desire  considered 
in  its  relation  to  the  ability  of  the  individual  to  satisfy 
want.  The  current  value  of  anything,  with  apologies  to 
Butler,  is  just  so  much  as  it  will  bring.  In  other  words, 
current  value  is  a  purely  relative  expression  of  the  ratios 
existing  between  the  thing  valued  and  other  things  hav- 
ing their  ratios  similarly  expressed.  To  say  that  the 
horse  is  worth  one  hundred  dollars  and  the  cow  is  worth 
fifty,  simply  indicates  if  the  exchange  is  to  be  fair,  that 
two  cows  must  be  given  for  one  horse. 


_  CURRENCY  AND  BANK  CREDIT  _  203 

Can  only  have    The  common  understanding  necessary  to 
a  single  £0  ^e  effective  use  of  credits  can  only  be  ob- 


tained by  a  single  standard  of  value.  If  two 
or  more  standards  are  used  it  necessitates  the  translation 
of  them  into  a  single  standard  before  exchange  can  pro- 
ceed. For  example,  if  the  Russian  uses  the  rouble  stand- 
ard and  the  American  uses  the  dollar,  each  must  know  the 
ratio  of  the  two  standards  to  each  other  before  arriving 
at  an  agreement. 

standard  The  standard  of  value  must  be  as  invariable 

must  be  as  ^e  contents  of  the  bushel  measure  or  the 

length  of  the  yard  stick.  Less  than  this  in- 
troduces confusion  and  necessarily  results  in  the  impair- 
Fiuctuating  ment  of  the  obligations  of  contracts.  To 
standard  robs  make  obligations  using  a  dear  standard  and 
either  debtor  discharge  by  a  cheaper  or  vice  versa,  results 

in  the  robbery  of  either  the  creditor  or 
debtor  as  the  one  or  the  other  method  is  used. 

Diverse  The  denunciations  of  the  old  Jewish  law- 

standards  givers  against  the  use  of  diverse  measures 
and  weights  apply  with  equal  force  to  the 
employment  of  any  standard  of  representative  values 
that  may  be  capable  of  being  made  either  cheaper  or 
dearer.  The  use  of  a  variable  standard  attacks  the  basic 
principle  upon  which  the  representative  exchange  system 
rests,  that  is  to  say,  it  weakens  faith  and  confidence  in 
the  exact  and  equal  justice  which  is  the  right  of  all. 

standard  The  measure  of  products  must  convey  a  mu- 

mustbe  tually  understood  impression  of  quantity, 

ntangibieand    }      th   or  number,  as  a  bushel  of  corn,  a 

invariable.  %    '     ,   ,  ,  ,'  ,          TT71 

yard  of  cloth  or  a  dozen  apples.  When  these 
concrete  products  are  exchanged  for  credit  instruments 


204  THE  WAY  OUT 


which  do  not  indicate  weight,  length,  or  numbers  but  only 
value,  there  must  of  necessity  be  found  a  unit  or  standard 
of  this  intangible  thing,  value,  which  is  also  itself  both 
intangible  and  invariable. 

Every  country  that  has  undertaken  to  supplement  bar- 
ter by  means  of  representative  credit  exchange  has  been 
compelled  to  adopt  some  arbitrary  term  to  express  the 
unit  or  standard  of  value.  In  all  cases  it  is  only  an  ab- 
stract idea,  as  invariable  as  a  yard  stick,  and  can  no  more 
preserve  a  fixed  ratio  to  any  product  than  the  yard  stick 
can  adjust  itself  to  the  expansion  or  contraction  of  the 
thing  measured. 

Value  is  Value  itself  is  variable.    It  is  ever  rising  or 

variable.  falling.    Its  static  periods,  if  they  exist  at 

all,  are  of  exceedingly  short  duration.  The  dinner  to  the 
hungry  man  is  valuable,  but  this  eaten,  the  next  is  worth 
considerably  less.  The  more  immediate  the  need,  the 
more  difficult  the  satisfaction  of  it,  the  higher  the  value. 

Credit  exchange  The  adoption  of  a  system  of  representative 
facilitates  credit  exchange  is  not  intended  to  lessen 
barter.  barter  in  any  degree.  On  the  other  hand,  it 

facilitates  it.  The  more  efficient  the  system  of  represent- 
ative credit  exchange,  the  more  general  will  be  the  actual 
bartering  of  products  themselves. 

The  standard  of  value — this  arbitrary  idea  represent- 
ing the  unit  of  value  in  credit  exchange — must,  like  the 
bushel  or  yard,  remain  invariable,  and  its  exponents 
show  the  exchange  ratio  of  the  product  to  which  it  is  ap- 
plied, just  as  in  the  case  of  the  measure  of  products  the 
bushel  is  an  invariable  quantity  while  the  number  of 


CURRENCY  AND  BANK  CREDIT 205 

bushels  indicates,  when  the  exchange  of  products  takes 
place,  the  ratio  that  the  product  measured  bears  to  that 
for  which  it  is  exchanged. 

The  standard  This  unit  or  standard  of  representative 
not  flexible.  value  therefore  can  have  no  flexibility.  Any 
change  in  the  value  of  the  unit  of  value  is  not  flexibility 
but  an  alteration  of  the  standard  making  it  either  cheaper 
or  dearer.  In  other  words,  such  change  is  the  adoption  of 
a  new  standard  of  value  and  introduces  the  immoral  prac- 
tice of  using  diverse  measures  by  which  one  buys  in  a 
large  measure  and  repays  in  a  smaller  or  vice  versa. 
This  is  obviously  robbery,  and  is  subversive  of  every  prin- 
ciple of  fair  exchange  and  destructive  of  confidence  and 
faith,  the  foundation  upon  which  a  system  of  credit  ex- 
change must  rest. 

Representative   Since  credit  exchange  is  effected  by  means 
of  representatives  of  value  these  must  orig- 
inate from  material  values,  because  they  are 
but  the  shadows  of  the  real  substance.    They  must  there- 
fore faithfully  represent  that  for  which  they  stand.    A 
dollar  of  credit  exchange,  then,  must  have  behind  it  a  dol- 
lar's worth  of  material  value  that  can  be  obtained  on 
demand  by  the  holder  of  the  instrument  of  credit  ex- 
change.   Whether  this  instrument  be  a  dollar  in  currency 
or  a  dollar  bank  credit,  it  must  be  convert- 
Credit  ik}e  on  demand  into  any  article  that  the 
exchange          holder  may  desire  to  take  out  of  the  world's 
market.    A  correct  system  of  representative 

on  demand  A 

into  credit  exchange  must  issue  demand  obhga- 

products.  tions  for  the  amount  of  value  of  the  products 

put  into  the  market,  and  liquidate  or  cancel 

a  like  amount  of  credit  value  when  the  products  are  taken 


206  THE  WAY  OUT 


out  of  the  market.    In  this  way  credit  exchange  automat- 
ically redeems  itself. 

Credit  It  is  the  most  obvious  of  fallacies  that  there 

exchange  must  or  can  be  any  particular  product, 
r®d®emed  m  whether  metal  or  not,  that  can  be  designated 
as  the  article  of  final  redemption  of  credit 
exchange.  Any  product  that  may  be  bought  in  the 
market  is  performing  its  part  in  the  redemption  of  repre- 
sentative value  and  to  the  extent  of  its  value  is  cancelling 
these  demand  obligations.  When  these  credit  obligations 
pass  through  many  hands  it  undeniably  makes  the  oper- 
ation more  complex  but  in  no  wise  alters  its  character. 
If  A  buys  of  B  one  hundred  bushels  of  potatoes  at  one 
dollar  per  bushel,  giving  him  a  demand  note  for  this 
amount,  and  if  then  B  buys  of  A  one  hundred  bushels  of 
wheat  at  one  dollar  per  bushel,  paying  A  by  returning 
him,  cancelled,  the  demand  obligation  for  one  hundred 
dollars,  the  credit  obligation  is  liquidated  and  the  trans- 
action is  closed.  If  this  credit  obligation  passes  through 
thousands  of  hands  and  A  finally  redeems  it  in  wheat, 
there  is  no  difference  in  the  principle  involved. 

Essential  Credit  instruments,  in  the  last  analysis,  are 

features  finally  redeemed  in  property,  the  kind  of 

of  c™  property  depending  upon  the  available  stock 

for  sale  and  the  choice  of  the  holder  of  the 
credit  instrument.  The  essential  features  of  efficient 
credit  exchange  instruments  are  that  they  each  must  be 
for  a  definite  number  of  the  units  of  the  standard  of 
value,  and  that  these  demands  upon  the  available  stock 
of  things  must  be  promptly  honored  when  and  wherever 
offered  in  payment  for  a  corresponding  amount  of  value. 
Failure  to  meet  either  of  these  requirements  is  fatal  to 
the  successful  operation  of  the  system. 


CURRENCY  AND  BANK  CREDIT 207 

Credit  instru-  Purely  representative  credit  instruments, 
merits.  for  ^e  purp0se  of  this  discussion,  may  be 

divided  into  two  classes,  viz. :  government  currency  and 
bank  credits.    In  the  former  are  included  all  paper  token 
money,  whether  treasury  notes  or  national  bank  notes, 
and  such  metallic  token  money  as  may  be  exchangeable 
at  a  given  value  merely  because  it  bears  the  government 
stamp.    From  it  gold  is  excluded  since  it  is 
supposed  to  carry  a  value  as  a  metal  equal  to 
exchange          ^at  which  it  commands  as  a  stamped  coin. 
Exchange  of  gold  for  products,  loans  or  pay- 
ment of  obligation  is  simply  barter.    Gold  certificates  are 
likewise  excluded  since  they,  properly  considered,  are 
nothing  more  nor  less  than  warehouse  receipts  for  gold 
deposited  with  the  government  of  the  United  States. 

All  currency      The  different  kinds  of  currency,  passing 
practically        from  hand  to  hand  without  indorsement,  are 
essentially  government  currency,  since  all  of 
it  owes  its  general  acceptance  to  the  actual 
or  supposed  government  responsibility  for  its  redemp- 
tion.   There  appears  to  be  neither  reason  nor  justifica- 
tion for  the  variety  of  this  currency.    The  government 
alone  should  issue  it,  and  it  all  should  be  of  the  same  kind 
differing  only  in  denominational  value. 

Bank  credits.  Bank  credits  include  both  the  demand  obli- 
gations of  banks  and  deposits  subject  to  check — i.  e., 
bankers'  checks  against  balances  in  other  banks  and  de- 
positors' checks  against  balances  in  bank.  Bank  credits 
furnish  the  greater  part  of  representative  credit  ex- 
change. It  is  necessarily  more  restricted  in  circulation 
than  government  currency  but  is  much  greater  in 
amount.  It  is  peculiarly  suited  for  transactions  of  record 
and  for  transmission  of  larger  amounts  of  credit. 


208  THE  WAY  OUT 


A  sound  Since  representative  credit  exchange  is  the 

currency  reflection  of  property  put  in  the  market  or 

im<  sold,  and  is  liquidated  when  property  is 

taken  out  of  the  market  or  bought  for  use  or  consumption, 
it  necessarily  follows  that  a  sound  system  of  credit  ex- 
change must  function  in  accord  with  these  controlling 
facts. 

Arbitrary  Since  the  credit  exchange  existing  at  any 
alteration  in  given  time  should  always  equal  in  value  the 
balances  arising  from  the  unliquidated  obli- 


gations  incurred  in  the  interchange  of  prop- 
standard.  erty  an(i  products  in  process  of  exchange,  it 

follows  that  any  arbitrary  alteration  of  this 
proportion  will  of  necessity  result  in  the  change  of  the 
value  of  the  standard  itself.  If  the  sum  of  the  products 
sold  equals  one  hundred  dollars  in  value  and  credit  value 
of  that  amount  is  issued  for  it,  and  if  then  this  currency 
is  arbitrarily  raised  to  two  hundred  dollars,  the  standard 
will  be  changed  and  the  adjustment  made  by  means  of  a 
rise  in  the  nominal  value  of  the  products  to  equal  the 
amount  of  inflation  injected  into  the  representative 
credits.  The  rise  in  prices  that  invariably  accompanies 
inflation  of  credits  is  due  to  this  cause. 

Change  of  If  everything  rose  in  periods  of  inflation  or 
standard  f  eu  in  those  of  deflation  in  the  same  propor- 

tion, it  would  not  occasion  much  serious  loss, 
debt^and  s*nce  ^  wou^  amount  to  nothing  more  than 
products.  counting  in  higher  or  lower  numbers.  Un- 

fortunately, neither  inflation  nor  deflation 
affects  all  things  uniformly.  Fixed  amounts  either  of 
debts  or  incomes  remain  nominally  the  same  whatever 
may  be  the  change  in  the  value  of  the  standard,  hence  any 
arbitrary  change  either  by  inflation  or  deflation  is  a 


CURRENCY  AND  BANK  CREDIT 


209 


change  in  the  ratio  between  products  and  property  on  the 
one  side,  and  debts  and  incomes  on  the  other.  The  cred- 
itors and  receivers  of  fixed  incomes  lose  as  the  standard 
is  cheapened,  and  the  debtors  as  the  standard  is  made 
dearer. 


Bank  credits 
normally 
conform 
automatically 
to  represent- 
ative credit 
principles. 


If  left  alone,  bank  credits  naturally  conform 
to  the  law  that  representative  credits  shall 
maintain  an  invariable  relation  or  ratio  to 
the  value  of  the  unliquidated  amounts  paid 
for  the  things  in  process  of  exchange.  These 
demands  upon  the  market  are  in  a  direct 
way  analogous  to  warehouse  receipts  which 

entitle  the  holders  to  claim  at  will  the  stored  articles. 

Upon  delivery  of  the  property  the  warehouse  receipt  is 

surrendered  and  cancelled. 


In  the  case  of  bank  credits  the  thing  stored 
is  value  instead  of  property,  and  the  holder 


Credit 
exchange 

representatives         n  demand  is  entitled  to  receive  from  the 

demands  for  1,1  T  /.  ,  •  *•,   « 

market  the  exact  value  of  his  credit  in  any 
kind  of  property  or  product  that  may  be 
found  for  sale.  When  all  of  these  outstanding  credits 
have  been  redeemed  in  products  and  property  the  ex- 
change account  stands  balanced. 


stored  value. 


Representative 
credit 
exchange 
should  not 
affect  prices. 


It  will  be  noted  that  the  scarcity  or  pleni- 
tude of  products  under  this  system  will 
neither  increase  nor  decrease  the  sum  of  the 
representative  credit  values  extant.  These 
values  are  created  as  the  goods  are  sold,  and 
liquidated  as  they  are  bought.  Under  this  system  price 
changes  will  still  occur,  but  they  will  be  due  to  the  effects 
of  supply  and  demand,  the  exercise  of  monopoly  control, 
etc.,  and  not  to  arbitrary  change  in  the  standard  of  value. 


14 


210  THE  WAY  OUT 


Fiat  credit  However  arbitrary  may  be  the  method  of 
instruments  regulating  the  amount  of  currency  and  bank 
affect  prices.  credit,  such  for  instance  as  issuing  currency 
against  government  bonds,  or  metal  reserves,  or  the  cre- 
ating of  fiat  bank  credits  against  gold  reserves,  there  will 
be  a  ratio  between  the  sum  of  these  credits  and  the  bal- 
ance of  representative  credits  resulting  from  selling 
goods  into  the  market  and  buying  goods  out  of  the 
market,  and  this  ratio  regulates  the  effect  that  currency 
and  bank  credits  have  upon  prices.  To  illustrate :  if  the 
currency  and  bank  credits  consisting  only  of  the  unliqui- 
dated balances  arising  out  of  the  sales  and  purchases  of 
property  and  products  made  a  certain  volume  of  repre- 
sentative credit  exchange,  the  price  level,  let  us  say, 
would  be  100.  Now  if  the  volume  should  be  arbitrarily 
doubled  the  price  level  would  rise  to  200.  This  rise  in 
prices  would  occur  regardless  of  the  character  of  the  ar- 
bitrary credit  exchange  created.  Notes  issued  against 
gold  deposited  in  the  treasury  or  notes  without  cover 
issued  to  pay  governmental  expenses,  if  the  amount  of  the 
issues  were  equal  would  have  identically  the  same  effect 
on  the  price  level. 

The  value  When  credits  are  restricted  to  a  smaller 
of  the  unit  sum  than  would  normally  result  from  goods 
changed  by  an(j  pr0perty  so\^  the  scale  of  prices  lowers 

arbitrary  ^     r       \1.1     .'        .         ,    «,.  ,     -,  i 

issues  until  an  equilibrium  is  established  between 

things  sold  and  the  credits  available  to  buy 
them,  and  likewise  when  the  sum  of  credits  is  nominally 
increased,  the  prices  of  things  rise  until  an  equilibrium 
is  established.  Any  change  of  ratio  at  once  raises  or 
lowers  the  value  of  the  unit  or  standard  of  values  and 
thereby  impairs  the  obligations  of  all  preexisting  con- 
tracts, since  debts,  fixed  charges  and  established  incomes 
remain  nominally  the  same  whether  the  value  of  the  unit 


_  CURRENCY  AND  BANK  CREDIT  _  211 

of  value  is  lowered  or  raised.  In  the  former  case  the 
creditor  is  robbed,  while  in  the  latter  the  debtor  is  doubly 
robbed,  in  that  the  debtor's  gains  are  percentages  of  low 
values  while  the  creditor's  gains  are  percentages  of  high 
value. 

No  arbitrary  No  arbitrary  method  of  creating  currency 
system  can  be  an(j  kank  credits  can  possibly  preserve  an 
uniform  ratio  to  that  which  should  obtain 
between  things  in  process  of  exchange  and  the  credits  rep- 
resenting them,  since  it  would  be  impossible  for  any  arbi- 
trary system  to  function  with  one  which  automatically 
rises  and  falls  as  the  tide  of  products  flows  into  the 
market  and  recedes  out  of  it. 

Arbitrary          It  is  the  effort  to  do  arbitrarily  that  which 

interference       should  be  left  free  to  follow  a  natural  and 

easy  course  that  involves  the  financial  sys- 

of  robbery.  „     .    .,.      .  . 

terns  of  civilized  countries  in  so  much  con- 
fusion, and  incidentally  furnishes  the  few  more  astute 
enlarged  opportunities  to  prey  upon  the  less  informed 
masses.  So  refined  is  this  method  of  conscienceless  rob- 
bery that  the  most  of  those  despoiled  are  in  no  degree 
conscious  of  either  the  source  or  the  method  of  their  de- 
privation. They  know  that  something  is  wrong  and  place 
the  responsibility  upon  almost  anything  from  providence 
down  to  the  corner  grocer.  The  most  of  them  remain 
entirely  ignorant  of  the  deft  hands  that  pilfer  their 
pockets  by  the  very%  simple  method  of  expanding  or  con- 
tracting credit,  thereby  changing  the  measure  of  value. 

The  only  The  only  possible  standard  of  value  of  a  sys- 

tem of  representative  credit  exchange,  as  al- 
tan<3  ready  explained,  is  an  abstract  idea  —  an  ar- 


bitrary designation  that  forms  a  common 
term  or  common  denominator  into  which  all  values  may 


212  THE  WAY  OUT 


enter  and  permit  their  ratios  to  each  other  to  be  ex- 
pressed. It  is  obvious,  too,  that  no  single  product  can  be 
used  as  this  standard. 

The  standard      This  intangible,  arbitrary  term  called  dol- 

does  not  iar>  f ranc>  mark,  pound,  sterling,  rouble,  or 

what  you  will,  expresses  the  present  market 

value  of  the  product  to  which  it  is  applied, 

but  in  no  wise  makes,  'or  even  influences,  value  any  more 

than   the  bushel  measure  increases  or   decreases  the 

amount  of  wheat.    The  dollar  registers  the  sum  of  value 

as  it  exists,  and  the  bushel  measure  registers  the  amount 

of  wheat. 

Gold  cannot  be  Values  are  created  by  demand  and  supply 
a  standard  jn  a  f  ree  market,  or  by  the  same  as  manipu- 
lated in  a  controlled  market.  It  has  already 
been  noted  that  gold,  used  as  a  medium  of  exchange,  is 
not  representative  exchange  at  all  but  simply  barter. 
Contrary  to  the  general  opinion,  gold  is  not  and  cannot 
be  a  standard  of  value  in  a  system  of  representative 
credit  exchange.  The  fact  that  so  many  countries  have 
exercised  monopoly  power  to  put  an  arbitrary  price  on 
gold  does  not  qualify  it  as  a  standard.  If  the  exercise  of 
this  power  went  no  further  than  to  decree  that  so  many 
grains  of  gold  should  equal  the  value  of  the  representative 
unit,  it  would  have  no  effect  other  than  to  compel  those 
who  desired  gold  for  use  to  pay  a  monopoly  price  for  it. 
The  price  of  other  products  would  not  be  affected.  But 
when  this  gold  is  controlled  by  monopolists  and  used  as 
the  basis  for  the  issue  of  representative  credit  instru- 
ments, it  becomes  apparent  that  such  a  system  confers 
upon  its  manipulators  the  power  to  expand  or  contract 
the  credit  instruments  either  of  currency  credits  or  bank 
credits  or  both,  at  will. 


_  CURRENCY  AND  BANK  CREDIT  _  213 

The  power  to      In  other  words,  this  power  to  expand  or  con- 
expand  or          tract  credits  is  the  power  to  change  the 

contract  credits   meagure  of  yalue  and  rob  either  debtor  Qr 
is  the  power  ,.  ....  , 

torot)  creditor,  as  the  monopolistic  manipulators 

of  gold  may  choose.  Under  such  a  system, 
when  there  arises  the  need  to  ship  large  quantities  of  gold 
out  of  one  country  into  another,  it  is  possible  that  a  se- 
rious interference  with  the  orderly  functioning  of  the 
credit  exchange  systems  of  both  nations  may  result, 
through  the  creation  of  a  stringency  in  one  and  a  state 
of  redundancy  in  the  other.  This  change  of  credit  status 
is  brought  about  by  a  contraction  of  the  base  of  the  credit 
issue  in  the  one  and  a  broadening  of  it  in  the  other. 

Shipment  of       Under  a  proper  system,  based  upon  the  bona 
gold  should        fide  credits  resulting  from  products  sold  in 


have  no  effect     ^  market,  the  shipment  of  gold  would  have 

on  credit  r      •*  j-if     i,-  4.    * 

exchange  no  more  significance  than  the  shipment  of  a 
like  amount  in  value  of  wheat  or  any  other 
product.  It  is  a  source  of  infinite  wonder  that  civilized 
people  of  supposed  intelligence  should  have  permitted  the 
present  credit  system  with  its  illegitimate  use  and  abuse 
of  gold  to  continue  so  long  in  effect. 

Gold  as  a  basis  The  use  of  gold  as  a  basis  of  currency  places 
of  currency  a  jn  the  hands  of  the  dominating  financial  in- 
terests the  power  to  increase  or  decrease  the 
volume  of  credits  at  will,  and  thus  cause 
prices  to  rise  or  fall  as  it  may  best  suit  their  purposes. 
The  manipulators  of  credit  by  these  means  may  sell  when 
they  have  made  the  scale  of  prices  as  high  as  they  choose, 
and  buy  back  when  they  have  made  it  as  low  as  they  care 
or  dare  to  make  it.  The  exercise  of  such  arbitrary  power, 
dominated  as  it  will  be  under  the  present  system  by  sel- 


214  THE  WAY  OUT 


fish  incentive,  must  bring  want,  destitution,  bankruptcy, 
idleness,  starvation  and  suicide  to  the  many,  and  untold 
riches  to  the  few. 

Immorality  of  It  is  the  power  to  change  the  measure,  to  use 
the  gold  basis,  diverse  measure,  to  buy  in  the  large  meas- 
ure and  to  repay  in  the  small.  It  is  contrary  to  every 
moral  principle  and  is  the  meanest,  most  despicable,  as 
well  as  the  most  insidious  method  of  pilfering  the  goods 
and  chattels  of  the  ignorant,  and  therefore  helpless,  who 
have  thus  far  shown  little  capacity  to  discover  and  place 
the  responsibility  for  their  wrongs.  The  shame  of  it  is 
that  the  imposition  upon  the  world  of  the  so-called  gold 
standard  is  done  in  the  name  of  honest,  sound  money ! 

Abuse  of  power  America  is  now  (1921)  passing  through  a 
and  its  effects,  terrible  example  of  the  abuse  of  power  to  in- 
flate and  deflate  credit.  It  is  more  striking  because  it 
was  blunderingly  managed.  Had  it  been  effected  in  a 
more  scientific  or  evolutionary  way,  the  robbery  might 
have  been  productive  of  even  more  spoils,  yet  it  would  not 
have  been  so  keenly  felt,  in  that  the  loss  would  have  been 
more  gradual  and,  being  extended  over  a  longer  time, 
would  have  given  the  victims  an  opportunity  to  surren- 
der the  booty  on  the  installment  plan.  While  this  slower 
but  none  the  less  sure  method  might,  and  there  is  little 
doubt  would,  have  entailed  less  privation  and  suffering, 
it  would  have  been  robbery  all  the  same. 

The  change  of  the  measure  of  value  whether  by  a  sov- 
ereign state,  an  agency  created  by  it,  or  an  individual  is 
an  unholy,  unwarranted  thing,  a  heinous  sin 
in  the  sight  of  God,  which  should  be  for- 
standarda  bidden  under  severe  penalties.  The  sin  of 
heinous  sin.  the  highwayman  who  holds  up  his  victim 
and  by  physical  force  despoils  him,  or  that 
of  the  bold,  bad  pirate  who  seizes  the  cargo  and  scuttles* 


_  CURRENCY  AND  BANK  CREDIT  _  215 

the  unarmed  merchantman,  is  as  white  as  wool  compared 
to  that  of  the  financial  manipulator  who  changes  the 
value  of  the  standard  for  the  purpose  of  exacting  a  larger 
value  in  settlement  than  the  measure  represented  when 
the  obligation  was  made.  This  language  —  to  those  who 
have  not  correctly  analyzed  the  principles  involved  —  may 
seem  intemperate,  but  certainly  not  so  to  those  who  have 
acquired  an  understanding  of  the  thing  itself. 

The  characterization  in  the  present  case  should  be  con- 
strued as  descriptive  of  effects  rather  than  as  denuncia- 
tory of  persons,  since  the  purpose  is  to  expose  the  un- 
soundness  of  the  present  currency  and  representative 
credit  system,  rather  than  to  call  into  question  the  moral 
derelictions  of  those  who  operate  it. 

Reference  has  been  made  to  matters  of  administration, 

and  some  of  the  opportunities  for  abuse  which  the  un- 

sound system  affords  have  been  pointed  out,  but  these 

may  be  regarded  as  incidental  digressions.     The  main 

contention  is  that  the  acceptance  of  the  doc- 

trine that  any  material  substance,  gold,  or 

substance  can 

be  a  standard     an^  °^er  concrete  thing,  ever  was  or  ever 


of  value.  can  be  a  standard  of  value  in  a  representa- 

tive credit  system  is  an  egregious  error  — 
and  further  that  the  making  of  gold  or  any  other  ma- 
terial substance  the  basis  for  the  issue  of  currency  or 
credit  exchange  renders  the  system  arbitrary  and  subject 
to  dangerous  manipulation  both  from  ignorance  and  de- 
sign. Only  the  omniscient  and  the  omnipotent  could  op- 
erate such  a  system  with  the  nicety  of  readjustment  that 
would  be  required  to  prevent  the  evil  of  constant  change 
of  the  value  of  the  standard  itself. 


216  THE  WAY  OUT 


The  When  these  basic  truths  are  fully  under- 

Federal  stood,  and  we  remember  that  this  great 

country,  the  United  States  of  America,  has 
committed  itself  to  a  system  of  currency  and 
bank  credit  that  places  in  the  hands  of  seven  men  the 
power  arbitrarily  to  call  representative  credit  into  exist- 
ence to  an  extent  limited  only  by  its  relations  to  a  gold 
reserve,  it  becomes  apparent  that  the  last  word  in  cur- 
rency and  credit  reform  has  not  yet  been  spoken. 

Credit  As  has  already  been  pointed  out,  credit  is 

currency  representative;  it  is  merely  the  shadow  of 

purely  ^  reaj  sukst;ance.    The  credit  instruments 

representative.         .  .   ,    .  . 

arise  as  material  things  go  into  the  market 

and  are  sold,  and  these  instruments  are  automatically 
liquidated  as  the  material  products  are  bought  for  stor- 
age and  use.  This  being  true,  what  possible  relation  could 
there  be  between  a  fixed  quantity  of  gold  stored  in  a 
treasury  vault  and  the  ever  changing  volume  of  trade 
in  the  market?  The  mere  statement  of  the  proposition 
makes  its  absurdity  obvious. 

Objections  The  use  of  gold  or  any  other  material  sub- 
to  tlie  stance  as  a  basis  for  the  issue  of  representa- 

go    basis.         £jve  cre(jit  exchange  is  for  several  reasons 

objectional.  The  amount  of  gold  available  at  any  given 
time  for  this  purpose  bears  no  proper  relation  to  the 
amount  of  credit  exchange  needed  to  represent  the  sum 
of  the  values  of  products  and  property  in  process  of  ex- 
change. These  sums  are  constantly  increasing  or  de- 
creasing as  the  exchange  of  products  is  proceeding 
rapidly  or  slowly,  hence,  instead  of  the  greater  activity  of 
the  market  furnishing,  as  it  should  do,  more  credit  ex- 


CURRENCY  AND  BANK  CREDIT 217 

change,  under  any  arbitrary  system  credit  exchange  will 
be  relatively  more  restricted  and  conditions  more  strin- 
gent as  the  exchanges  take  place  more  readily,  and  just 
the  reverse  when  trading  is  slow.  Expressed  differently, 
there  will  be  relatively  the  less  supply  of  representative 
credit  exchange  when  most  needed,  and  the  greater  abun- 
dance when  there  is  least  use  for  it. 

Credit  It  should  be  well  understood  that  represent- 

exchange  ayve  cre(jit  exchange  is  not  capital  but  only 

the  representative  of  capital,  and  the  de- 
mand for  credit  for  purely  exchange  purposes,  if  a  proper 
system  of  credit  exchange  exists,  could  never  be  greater 
than  the  supply,  for  if  the  instruments  of  credit  ex- 
changes are  called  into  existence  by  the  putting  of  prop- 
erty and  products  into  the  market  and  selling  them,  and 
if  buying  things  out  of  the  market  cancels  the  same 
amount  of  value  as  had  been  created,  it  is  self-evident 
that  there  could  never  exist  a  shortage  of  credit  instru- 
ments. 


A  shortage         If  at  any  time  there  is  a  deficiency  of  supply 
of  currency        Of  cre(j}t  exchange,  this  proves  incontestably 

that  the  system  under  which  it  is  issued  and 
a  defective  ,  '  .  .  .  „  ,.  ... 

system  manipulated   is   defective   and   arbitrary. 

Under  a  proper  system  by  which  property 
and  products  sold  would  call  into  existence  automatically 
their  own  representative  credit  values,  financial  strin- 
gency could  only  occur  when  the  demand  for  actual  cap- 
ital, i.  e.,  property  and  products,  began  to  exceed  the  ex- 
isting supply  of  them.  When  this  condition  occurs  the 
need  is  not  for  more  credit  exchange,  but  either  for  en- 
larged production  or  a  slacking  down  in  the  use  of  capital. 


2 


18  THE  WAY  OUT 


Differentiation  A  clear  understanding  of  the  function  of 
between  representative  credit  exchange  requires  that 

e  there  must  be  a  distinct  differentiation  be- 
tween  the  function  of  exchange  instruments 
of  capital.  as  such  and  the  matter  of  acquisition  of  cap- 
ital. The  former  is  only  a  method  of  facili- 
tating barter ;  the  latter,  so  far  as  credit  instruments  are 
involved,  is  the  process  of  collecting  them  and  effecting 
their  liquidation  by  means  of  the  purchase  of  actual 
property  or  products. 

Acquiring  As  already  explained,  when  capital,  i.  e., 
capital  property  and  products,  is  taken  out  of  the 

decreases  market  it  automatically  cancels  or  liqui- 

exchange  dates  the  currency  and  bank  credits  repre- 

senting it.  If  it  is  reproductively  used,  it 
again  gives  rise  to  representative  credit  instruments 
when  the  products  resulting  from  the  use  of  the  invested 
capital  begin  to  be  sold  in  the  market.  Whenever  capital 
is  employed  in  a  way  that  requires  a  long  time  to  effect 
the  return  of  products  to  the  market,  such  use  causes  a 
contraction  of  the  basis  of  representative  credit  exchange 
and  if  carried  far  enough  will  produce  serious  reaction. 

"Flexible"  It  is  at  this  point  that  the  temptation  arises 
currency  £0  provide  some  method  of  making  the  cur- 

bad  currency.     rency  and  credit  exchange  system  "flexible." 

Since  it  is  impossible  to  make  something  out  of  nothing, 
all  efforts  by  such  methods  to  increase  the  sum  of  avail- 
able capital  will  not  only  fail  of  their  purpose  but  produce 
many  harmful  effects  in  other  directions,  chief  among 
which  will  be  the  arbitrary  change  in  the  standard  of 
value.  The  stringency  occasioned  by  the  excessive  use  of 
capital  for  things  of  non-utility,  or  for  the  production  of 
useful  things  in  advance  of  the  need  for  them,  is  the  eco- 


CURRENCY  AND  BANK  CREDIT 219 

nomic  danger  signal  which  to  the  wise  would  mean  either 
that  greater  production  of  capital  must  be  had,  or  its  use 
curtailed,  or  perhaps  both. 

The  function  The  function  of  banks  is  to  gather  the  rep- 
of  banks.  resentative  credits  of  the  country,  and  those 

in  excess  of  the  immediate  need  of  the  holders  constitute 
a  loan  fund  which  the  banks  can  loan  on  time  to  those  who 
desire  to  use  it  immediately.  The  borrowers  proceed  to 
liquidate  the  representative  credit  exchange  through  in- 
vestment in  actual  capital.  The  original  holders  through 
the  banks  have  therefore  in  effect  loaned  the  capital 
bought  by  the  borrowers,  accepting  therefor  time  obliga- 
tions which  take  the  transactions  out  of  the  realm  of 
credit  exchange.  The  banks  in  making  these  loans,  per- 
form a  highly  useful  service,  since  surplus  capital  is 
thereby  kept  in  constant  use,  which  of  itself  makes  pos- 
sible a  higher  degree  of  social  and  economic  efficiency. 

Only  loans  it  is  clear,  however,  that  the  legitimate  field 
of  bonafide  Of  the  banks  is  confined  to  the  loan  of  bona 
capital  fide  capitaj  and  that  any  method  of  predi- 

legitimate.  *\     .    ,  /?          i  •    j 

eating  their  loans  upon  a  reserve  01  any  kind 
which  might  enable  them  to  loan  sums  of  credit,  in  excess 
of  the  actual  surplus  of  capital  available  for  loaning  pur- 
poses, is  a  barefaced  fraud  upon  the  public.  It  is  "kiting" 
credit — a  practice  that  should  become  as  disreputable  as 
it  is  immoral.  No  manner  of  juggling  with  either  cur- 
rency or  bank  credits  can  add  to  or  subtract  from  the 
existing  stock  of  products  available  for  loaning  purposes. 
The  principal  effect  of  such  reprehensible  practices  is  to 
cause  values  to  be  counted  in  higher  or  lower  figures,  as 
inflation  or  deflation  of  credits  is  practiced. 


220  THE  WAY  OUT 


The  employment  of  gold  as  a  reserve  is  en- 
reserves  tirely  unnecessary  in  a  well  conceived  rep- 
not  useful.  resentative  credit  exchange  system.  It  is 
not  needed  as  a  liquidating  agent,  since  representative 
credits  automatically  liquidate  themselves.  It  furnishes 
no  reasonable  basis  for  measuring  the  volume  of  repre- 
sentative exchange  necessary  at  any  particular  time  for 
the  convenient  conduct  of  affairs.  It  never  has  and  never 
can  serve  as  a  measure  of  credit  value.  Why,  then,  should 
governments  give  to  it  a  monopoly  value  and  make  of  it 
the  regulator  of  the  volume  of  credit  exchange,  especially 
when  such  use  places  in  the  hands  of  its  manipulators 
the  power  to  make  the  country  prosperous  or  destitute  as 
may  seem  desirable  to  them? 

Excessive  gold    Such  use  of  gold  involves  a  tremendous  eco- 
production         nomic  loss,  in  that  billions  of  gold  are  pro- 
duced in  excess  of  the  legitimate  need  for  it. 
If  this  unwarranted  use  of  it  were  discon- 
tinued and  it  had  to  find  its  proper  value  in  a  free  market 
like  other  products,  there  would  still  be  a  demand  for  it 
for  its  proper  uses  in  the  arts,  for  jewelry,  etc.,  but  it  is 
safe  to  say  that  its  value  would  fall  one-half. 

Danger  At  the  present  time  the  United  States  of 

of  gold  America  seems  to  have  become  the  dumping 

accumulation.      ground  of  the  world  f  or  gold>  and  gince  it  }g 

being  sold  at  a  monopoly  price  entirely  out  of  proportion 
to  its  commodity  value  under  a  more  correct  monetary 
and  credit  system,  there  is  grave  doubt  whether  the  con- 
tinuation of  the  policy  is  wise  or  even  expedient.  When, 
too,  it  is  further  considered  that  practically  all  European 
nations  are  dangerously  near  bankruptcy  and  must  of  ne- 
cessity have  at  some  time  a  general  reorganization  and 
readjustment  of  their  currency  and  credit  systems,  it  be- 


CURRENCY  AND  BANK  CREDIT 221 

comes  imperative  that  this  country  should  examine  with 
great  care  the  fundamentals  of  the  subject  now  under  dis- 
cussion. Should  these  nations  find  that  gold  is  not  neces- 
sary to  the  functioning  of  a  well  ordered  currency  and 
credit  system  and  discontinue  its  use  for  this  purpose, 
what  would  be  the  economic  and  financial  effects  upon  a 
nation  whose  treasury  was  running  over  with  gold  bought 
at  double  its  commodity  value  for  the  uses  to  which  it 
would  be  confined  under  the  new  plan? 

Arepresenta-  The  thought  is  strongly  suggestive  of  an 
tive  currency  analogy  that  would  exist  between  such  a 
'?dne  government  and  the  speculator  who  had 
filled  his  warehouses  with  a  commodity 
which,  because  of  a  more  restricted  use,  had  lost  half  its 
value.  That  a  system  of  currency  and  bank  credits  that 
will  not  require  the  use  of  any  gold  can  be  organized  and 
successfully  operated  does  not  admit  of  serious  doubt. 
Not  only  can  it  be  made  to  function,  but  it  will  prove  far 
superior  to  the  present  system. 

Ups  and  downs  Much  of  the  rise  and  fall  of  business  activity 
of  business  js  ^ue  ^0  fae  fauity  operation  of  our  ex- 
*? ^  result  change  system.  When  the  heavy  losses  inci- 

of  defective  ,.J     .  ,  ,      ,.     J     ,  .  , 

system  (*en^  ^°  ™e  irregular  production  which  a  de- 

fective exchange  system  superinduces  are 
counted,  it  will  be  obvious  that  defects  which  impose  so 
great  an  economic  handicap  should  be  eliminated  as  early 
as  possible. 

Under  a  well  organized  system  of  production  and  ex- 
change everything  should  move  along  with  continuity  and 
steadiness,  except  so  far  as  fluctuations  might  be  oc- 
casioned by  weather  conditions  affecting  crop  yields,  by 
wars,  political  upheavals,  and  the  errors  in  judgment 
causing  unbalanced  production.  Under  the  more  correct 


222  THE  WAY  OUT 


system  such  a  thing  as  a  general  depression  or  a  great 
business  boom  would  be  practically  impossible,  and  so- 
ciety would  be  saved  the  sufferings  of  the  first  and  the 
improvident  wastes  of  the  latter. 

A  better  The  organization  of  a  better  currency  and 

system  bank  credit  system  does  not  appear  to  pre- 

possibie.  genj.  insuperabie  obstacles.  Much  of  the  ma- 

chinery for  it  is  already  in  use.  The  Federal  Reserve 
banks,  with  the  addition  of  a  Central  Bank  in  lieu  of  the 
Federal  Reserve  Board,  would  furnish  the  necessary 
framework.  This  Central  Bank  should  control  the  system 
and  should  alone  be  charged  with  the  duty  of  issuing  cur- 
rency, both  paper  and  coin,  restricting  the  use  of  the 
latter  to  what  might  be  needed  for  small  change  only. 

Paper    currency    should    be    issued    only 
against    the    surrender    of    corresponding 
against  bank      amounts  of  bank  credit,  and  a  reserve  of 
credit.  credits  equal  in  amount  to  the  amount  of 

currency  issued  and  outstanding  should  be 
set  aside  for  the  sole  purpose  of  redeeming  the  currency 
when  returned.  In  other  words,  the  Central  Bank  should 
on  demand  convert  bank  credits  into  currency  or  cur- 
rency into  bank  credits,  as  the  one  or  the  other  form  was 
desired. 

Not  possible  The  Central  Bank,  carrying  a  reserve  of 
to  inflate  the  credit  equal  to  the  amount  of  the  outstand- 

i  /»         -i  -i 

ing  currency  and  reconverting  the  currency 
into  bank  credit  as  it  was  returned,  could  never  increase 
or  decrease  the  available  loan  fund  by  its  currency  issues 
or  reconversions  of  it.  Currency  under  this  plan  would 
only  be  issued  for  use  as  currency,  and  when  it  was  no 
longer  needed  in  this  form,  it  would  be  reconverted  into 
bank  credit. 


CURRENCY  AND  BANK  CREDIT 223 

Change  of          The  exchange  of  bank  credit  for  currency, 
bank  credit        an(j  vjce  versa>  }s  constantly  done  at  present. 

into  currency       Qne  haying  a  credit  at  bank  hag  feut  to  haye 
or  vice  versa 

his  check  cashed  to  accomplish  it,  or  to  de- 
posit the  currency  and  receive  a  like  amount  of  bank 
credit.  This,  however,  only  applies  under  the  present 
system  to  such  currency  as  may  already  have  been  issued, 
while  under  the  proposed  plan  any  amount  of  new  cur- 
rency could  be  issued  upon  the  surrender  of  a  like  amount 
of  bank  credit.  In  other  words,  confirmed  bank  credits 
would  be  exchangeable  for  currency  at  par — or  currency 
for  bank  credits  on  the  same  terms.  Under  this  plan  no 
gold  would  be  necessary.  The  dollar,  whether  repre- 
sented by  currency  or  bank  credit,  would  be  redeemed  in 
whatever  the  holder  desired  to  buy  that  was  for  sale.  If 
he  desired  gold,  he  could  buy  it  as  a  commodity,  and  it  is 
safe  to  say,  if  the  proposed  system  were  put  into  opera- 
tion, that  the  holder's  dollar  would  buy  more  gold  than  it 
will  now  buy  under  the  present  system. 

Government       The  Central  Bank  with  its  branches  should 
be  owned  absolutely  and  operated  exclu- 

Bankin1^1        sive1^  by  the  United  States  government, 
system  ^e  issue  of  currency  and  the  control  of 

bank  credit  are  susceptible  of  such  recon- 
dite manipulation  to  accomplish  sinister  purposes  that 
they  cannot  with  any  degree  of  public  safety  be  left  under 
private  initiative,  dominated  as  it  will  always  be  by  sel- 
fish incentive.  These  social  conveniences — public  ser- 
vices of  the  highest  order — if  democratic  institutions  are 
to  live,  should  never  be  made  the  sources  of  private  gain. 
It  would  be  quite  as  safe  for  the  government  to  surrender 
its  judicial,  legislative,  or  executive  function  in  favor  of 
private  parties  that  would  assume  the  public  power  and 
make  it  a  vehicle  of  private  profit.  He  is  indeed  an  opti- 


224  THE  WAY  OUT 


mist  who  would  be  willing  to  entrust  such  tremendous 
power  to  any  private  persons  under  the  most  powerful  in- 
centives to  abuse  it.  God  did  not  make  any  man  who  is 
sufficiently  wise  and  good  to  hold  the  power  that  this 
would  give  him  over  his  fellow  creatures.  However  much 
opposed  the  public  may  be  to  the  extension  of  public  func- 
tion, due  regard  for  the  safety  of  society,  for  the  life  of 
free  institutions  and  for  the  hope  of  social  progress  will 
compel  it  as  a  matter  of  stern  necessity  to  apply  the  prin- 
ciple to  this  extent  at  least. 

Limiting  the  In  the  present  stage  of  social  development  it 
sphere  of  the  W0uld  perhaps  be  advisable  to  confine  the 
system.  operations  of  the  Central  Bank  and  its 

branches  to  dealings  with  the  government  and  the  banks. 
The  system  should  be  the  repository  of  all  government 
funds,  bank  reserves  and  surplus  credits,  and  should  loan 
them  under  proper  restrictions  at  the  points  of  greatest 
need.  The  rate  charged  for  loans  should  be  only  so  much 
as  would  be  necessary  to  cover  the  bank's  expenses,  in- 
cluding its  losses.  The  system  should  have  no  power,  di- 
rect or  indirect,  to  influence  rates  to  be 
char£ed  by  its  Patron  banks-  The  interest 
ra^e>  or  at  •'eas^  ^e  max™um>  that  banks 
could  charge  for  loans  should  be  established 
by  act  of  Congress. 

The  difficulty  The  proposed  system  presents,  of  itself,  no 
of  change.  insuperable  obstacle,  but  the  greater  diffi- 
culty and  the  more  perplexing  problem  is  to  find  an  easy, 
evolutionary  way  of  displacing  the  present  system,  with- 
out causing  the  harmful  effects  that  would  attend  sup- 
planting an  existing  system  by  even  a  better  one  that 
functions  on  a  different  principle. 


CURRENCY  AND  BANK  CREDIT 225 

Adjustment  The  present  volume  of  currency  and  bank 
of  a  new  credits  has  regulated  and  established  the 

Tefent*0  value  of  the  standard— the  dollar— and  this 

standard  *s  ^ue,  however  arbitrary  may  have  been 

of  value.  ^e  method.  If,  for  instance,  credit  had  been 

inflated  one  hundred  per  cent  above  what  it 
would  have  been  under  the  correct  method,  it  follows  that 
the  introduction  of  a  proper  system  would  produce  a 
change  in  the  value  of  the  standard  of  value  that  would 
alter  the  ratio  of  debts  to  property  and  products  in  the 
proportion  that  the  currency  would  be  deflated.  This 
change,  if  credits  had  been  inflated,  as  above  stated, 
would  double  debts  or  reduce  the  value  of  products  by 
half,  as  one  might  choose  to  express  it.  If  either  infla- 
tion or  deflation  takes  place,  the  debtor  or  creditor  is 
robbed,  the  standard  of  value  is  changed,  and  the  obliga- 
tions of  all  contracts  expressed  in  the  previous  standard 
are  seriously  impaired. 

Necessary  Theoretically,  justice  would  require  that  all 
to  maintain  debts,  when  the  new  system  was  established, 
present  volume  g^^  ]3e  augmented  or  reduced  as  the  new 

of  credit.  ,  •,-,/.       i 

scale  or  standard  of  value  was  cheaper  or 
dearer  than  that  of  the  system  superceded,  but  this  would 
likely  prove  to  be  impracticable.  If  the  sudden  change  of 
value  of  the  standard,  with  all  the  attendant  and  far- 
reaching  evils,  is  to  be  avoided,  it  would  be  indispensable 
that  the  same  volume  of  credit  should  be  maintained,  ex- 
cept so  far  as  it  might  be  changed  gradually  through  the 
operation  of  economic  law. 

Character          The  present  currency,  National  Bank  notes, 
of  present          greenbacks,  and  Federal  Reserve  notes,  are 
predicated  for  the  greater  part,  not  on  ac- 
tual credits  but  upon  debt.     Gold  certificates  are  only 


15 


226  THE  WAY  OUT 


warehouse  receipts,  and  when  the  gold  monopoly  is  once 
broken  neither  these  nor  the  stamped  gold  dollars  will 
circulate  at  par  with  currency  based  on  actual  credits. 
The  gold,  too,  held  as  reserves  against  Federal  Reserve 
notes,  will  decline  in  value,  leaving  a  loss  that  must  be 
sustained  by  someone. 

Liquidation  If  these  currency  obligations,  which  in  the 
of  currency.  ultimate  analysis  are  nothing  more  nor  less 
than  government  debts,  are  to  be  redeemed  or  liquidated, 
it  could  only  be  done  either  by  taxing  the  public  or  selling 
bonds.  Either  method  would  produce  the  same  result  in 
that  it  would  take  from  the  stock  of  bank  and  currency 
credits  an  amount  equal  to  the  amount  liquidated  and 
cancelled.  In  other  words,  the  available  supply  of  nom- 
inal credit  would  be  decreased  to  the  extent  of  the  amount 
of  currency  retired,  and  the  standard  of  value  would  be 
made  dearer  to  that  extent.  In  this  case,  creditors  would 
be  the  beneficiaries  of  the  change. 

Gradual  Sufficient  evidence  exists  to  warrant  the 

increase  of         statement  that  inflation  of  the  currency  in- 
creased steadily  from  the  beginning  of  this 
century  to  the  time  of  putting  the  Federal  Reserve  system 
into  operation.    Since  that  time,  the  inflation  of  both  cur- 
rency and  bank  credits  has  proceeded  by  leaps  and 
bounds.    The  constant  increase  in  the  per 
Rapid  inflation  capita  circulation  and  the  rising  tide  of 
Federal  prices  from  1900  to  the  time  of  the  intro- 

Reserve  duction  of  the  Federal  Reserve  system  have 

system.  popularly  been  supposed  to  be  due  to  the 

larger  production  of  gold,  b\it  the  more  reas- 
onable hypothesis  seems  to  be  that  the  larger  production 
superinduced  by  greater  intelligence,  more  scientific 
methods,  and  the  use  of  improved  machinery,  necessi- 
tated larger  use  of  currency,  and  as  the  method  of  ere- 


CURRENCY  AND  BANK  CREDIT 227 

ating  it  was  arbitrary  and  not  representative  of  value 
going  into  the  market,  every  dollar  issued  changed  the 
ratio  between  the  sum  of  representative  credits  and  the 
products  represented.  It  is  of  course  understood  that, 
there  being  no  method  for  transforming  bona  fide  rep- 
resentative credits  into  currency,  all  of  it  was  available 
in  the  form  of  bank  credit.  The  natural  result  of  this 
constant,  arbitrary  increase  of  the  sum  of  representative 
credit  caused  prices  of  all  products  and  property  to  in- 
crease in  nominal  value.  This  constant  enhancement  of 
the  price  level  must  have  resulted  under  such  circum- 
stances, whether  the  currency  consisted  of  gold,  or  simply 
of  paper  money  issued  against  bonds  or  without  security. 
It  was  the  arbitrary  increase  of  the  amount  of  the  circu- 
lating medium  that  caused  the  change  in  the  value  of  the 
standard.  The  enactment  of  the  Federal  Reserve  law  in- 
creased the  opportunity  for  changing  the  price  level,  vest- 
ing, as  it  did,  the  control  of  the  credit  system  in  a  board 
of  seven,  which  of  necessity  must  function  in  accord  with 
the  interests  owning  the  system.  This  law  in  effect  makes 
a  private  monopoly  of  the  credit  system  and  bestows  upon 
it  power  to  inflate  or  deflate  the  volume  of  representative 
currency  and  bank  credit  at  will.  Not  only  has  it  the 
power  to  change  bank  credit  into  currency  and  vice  versa, 
but  it  likewise  has  the  power  to  create  arbitrary  credit 
based  on  private  debt. 

A  suggested  A  practicable  solution  of  the  problem  would 
solution.  probably  be  found  in  the  following:  Or- 

ganize a  government  owned  and  operated  Central  Bank, 
which  would  alone  issue  currency.     Have  two  distinct 
forms  of  paper  money.    Call  the  one  "Treas- 

Two  kinds  of  r,,^       .    ,.    J    ,,         a~      ,.,  „ 

currency  ur^  n°tes     and  the  other     Credit  notes. 

Issue  "Treasury  notes"  equal  in  amount  to 
all  the  outstanding  currency  obligations   except   sub- 


228  THE  WAY  OUT 


sidiary  coins  and  silver  dollars  actually  needed  in  making 
exchanges. 

issue  Call  in  and  retire,  by  issuing  "Treasury 

"Treasury         notes"  for  them,  the  National  Bank  notes, 

no*e* '  *or         greenbacks,  gold  and  silver  certificates  and 

Federal  Reserve  notes.     This  amount  of 

currency. 

Treasury  notes  should  remain  fixed.  Under 
no  circumstances  should  the  volume  of  this  kind  of  cur- 
rency be  either  increased  or  decreased. 

Cancel  bonds  The  government  should  take  over  and  cancel 
held  against  the  bonds  held  against  National  Bank  notes, 
paying  the  National  Banks  whatever  excess 
there  might  be  above  the  amount  of  the  bank  notes  se- 
cured by  them. 

Disposition  of  The  holders  of  gold  and  silver  certificates 
gold  and  silver  should  have  the  option  of  taking  either  the 
certificates.  "Treasury  notes"  or  the  coin  called  for  in 
the  notes  held,  but  in  the  latter  case  no  further  liability 
should  attach  to  the  government. 

Discontinue  The  government  should  stop  the  coinage  of 
gold  and  silver  ^Q^  silver  an(J  gold  and  divorce  itself  en- 
coinage,  tirely  from  responsibility  for  the  market 
value  of  them. 

The  Central  Bank,  having  issued  "Treasury  notes"  for 
the  outstanding  Federal  Reserve  notes,  would  take  over 
the  gold  reserve  of  the  system  and  such  bank  obligations 
as  covered  the  outstanding  note  issues. 

Sale  of  gold  When  the  gold  and  debts  due  against  Fed- 
to  be  applied  eraj  Reserve  notes  were  liquidated,  what- 
to  payment  eyer  wag  rea]}ze(j  f rom  these  sources  should 
be  applied  to  the  payment  of  the  public  debt 
represented  by  bonds.  This  plan  would  impose  upon  the 


CURRENCY  AND  BANK  CREDIT 229 

government  the  duty  of  taking  over  the  most  of  the  gold 
supply  in  the  country.  This  gold  should  be  gradually 
sold  and  the  proceeds  used  to  effect  the  reduction  of  the 
government's  bonded  indebtedness. 

It  is  obvious  that  there  would  be  a  heavy  loss  involved 
in  disposing  of  this  gold,  but  it  seems  fairer  that  the 
public  should  bear  it  than  that  it  should  fall  upon  a  part 
of  the  people  who  were  no  more  responsible  than  the 
others  for  the  mistaken  public  policy  that  caused  the  loss. 

The  suggested  It  risks  little  to  say  that  this  solution  would 
system  better  ke  productive  of  far  better  results  than  the 

more  radical  way  of  redeeming  the  out- 
expedient.  ,.  ,  . 

standing  currency   and  inaugurating  the 

more  correct  system,  since  the  more  radical  method, 
though  correct  in  itself,  would  necessitate  a  tremendous 
change  in  the  price  level  and  establish  an  entirely  new 
ratio  between  products  and  property  on  the  one  side  and 
debts  on  the  other. 

stabilization  The  controlling  purpose  in  the  foregoing  ar- 
the  end  rangement  is  to  stabilize  values  and  pre- 

serve the  existing  ratio  between  products, 
property,  and  debts.  So  far  no  provision  has  been  made 
for  the  increase  of  currency  to  take  care  of  the  expanding 
need  of  an  enlarged  commerce.  The  amount  of  currency 
heretofore  used  is  made  static  and,  like  the  laws  of  the 
Medes  and  Persians,  should  never  change. 

The  issue  of  The  Central  Bank,  or  the  agency  for  issuing 
"Credit  notes."  currency,  should  upon  demand  and  upon  the 
delivery  of  an  equal  amount  of  bank  credit  to  it  by  the 
bank  taking  out  such  currency,  issue  "Credit  notes"  in 
any  amount  and  denomination  desired.  In  other  words, 
any  bank  could  get  these  "Credit  notes"  for  whatever 
amount  the  Central  Bank  or  its  branches  might  owe  it. 


230  THE  WAY  OUT 


Neither  The  Central  Bank  must,  however,  require 

increase  y^t  ^e  issuing  Of  new  currency  be  con- 


onotn7und  ducted  on  a  strictly  cash  basis.  That  is  to 
say,  that  the  loan  fund  would  neither  be  in- 
creased nor  diminished  by  the  issue  of  new  currency, 
since  it  only  amounts  to  a  change  of  form  of  credit.  The 
bank  taking  out  the  new  currency,  or  returning  it  to  the 
Central  Bank  for  reconversion  into  bank  credit,  would 
have  identically  the  same  amount  of  liquid  or  loanable 
funds  in  either  case. 

Central  Bank  The  Central  Bank  should  carry  at  all  times 
reserves.  a  reserve  equal  in  amount  to  the  amount  of 

"Credit  notes"  outstanding,  and  this  reserve  should  only 
be  used  for  the  reconversion  of  "Credit  notes"  into  bank 
credits  when  the  currency  was  returned. 

Currency  for  Under  this  plan  currency  would  never  be 
use  as  such  taken  out  except  for  use  as  such,  nor  would 
only'  the  change  in  the  volume  resulting  from  the 

issue  of  it  or  its  reconversion  have  any  effect  on  the  value 
of  the  standard  or  the  general  price  level.  Both  the 
"Treasury  notes"  and  the  "Credit  notes"  should  be  made 
full  legal  tender  and  receivable  for  all  debts,  public  and 
private. 

Proper  Along   with   this   currency    system    there 

banking  should  be  enacted  proper  banking  laws  re- 

laws*  stricting  the  loaning  power  of  banks  to  le- 

gitimate loan  funds,  and  requiring  that  they  keep  suffi- 
cient reserves  deposited  with  the  Central  Bank  to  insure 
the  safety  of  their  operations. 

interest  rates     The  maximum  interest  rate  on  deposits  and 

regulated  by      ioans  should  be  regulated  by  Federal  stat- 

ute.    Such  a  currency  and  credit  system 

would  stabilize  prices  by  making  the  unit  of  value  invari- 


CURRENCY  AND  BANK  CREDIT 231 

able,  and  harmonize  employers  and  employees,  since  a 
variable  unit  of  value  is  a  thing  most  prolific  of  labor 
disturbance,  introducing  as  it  must,  the  question  of  re- 
adjustment of  wages  to  the  purchasing  power  of  the  un- 
stable standard  of  value.  It  would  enable  both  the  debtor 
and  the  creditor  to  feel  secure  that  the  debt  would  be 
liquidated  in  the  same  measure  that  obtained  when  it 
was  made. 

Currency  and     It  is  not  intended  to  say  that  there  would  be 

credit  system      no   change   in  prices,   but   if  there   were 

changes  they  would  not  be  occasioned  by  the 

affect  prices.  J  .  J 

currency  and  credit  system.  Price  changes 
would  and  should  occur,  but  they  would  result  from  the 
operation  of  economic  law. 

Economic  law  If y  On  account  of  crop  failure,  inefficiency  of 
the  true  price  labor,  or  whatever  cause,  the  supply  of  a 
given  product  should  be  reduced,  the  price 
of  it  would  rise  to  induce  greater  production.  On  the 
other  hand,  if  production  were  in  excess  of  the  need,  the 
price  would  fall  to  compel  producers  to  lessen  production 
to  the  extent  necessary  to  bring  the  particular  products 
into  balance  with  the  demand  for  it.  These  changes  are 
salutary  and  necessary  to  an  orderly,  well  balanced  pro- 
duction and  even  if  they  could  be  stopped,  it  would  be  un- 
wise to  do  so. 

Principle,          It  will  be  observed  that  the  proposed  plan 
not  human         largely    eliminates    human    discretion    in 
matters  of  credit,  whether  exercised  by  an 
individual  or  a  board,  and  relies  entirely 
upon  correct  principles  for  the  regulation  of  credit  oper- 
ations.    The  nation  under  this  plan  may  make  all  the 
bank  credit  it  can  and  convert  as  much  of  it  as  it  chooses 
into  currency,  but  it  cannot  lend  a  dollar  that  it  does  not 


232  THE  WAY  OUT 


possess.  It  cannot  perpetrate  a  fraud  upon  the  public  by 
calling  into  existence  false  credit  as  the  present  system 
does,  thereby  calling  down  upon  the  nation  the  train  of 
evils  that  invariably  follows  such  reprehensible  practices. 
This  new  system  may,  and  no  doubt  will,  be  considered 
radical,  but  it  rests  upon  sound  principles  and  will  stand 
the  test  whenever  tried.  It  can  only  prove  to  be  perma- 
nently harmful  to  speculators  and  gamblers,  who  are  the 
beneficiaries  of  unstable  conditions  and  whose  rewards 
are  most  liberal  when  the  nation  is  most  unfortunate. 
Honest  businesses  of  all  classes  have  nothing  to  fear  from 
it. 

Redemption  of  It  will  probably  be  suggested  that  no  ade- 
currency.  quate  provision  has  been  made  for  the  re- 
demption of  the  currency  herein  proposed.  This  matter 
of  redemption  is  usually  the  bete  noire  of  immature  stu- 
dents of  currency.  It  is  frankly  admitted  that  provision 
for  redemption  was  not  made  because  it  is  not  the  inten- 
tion that  it  should  be  redeemed.  In  the  case  of  the 
"Treasury  notes"  the  government  assumes  liability  for 
them  simply  to  provide  the  public  instruments  of  ex- 
change that  may  be  used  in  a  way  that  will  stabilize  the 
present  standard  of  value,  and  the  fact  that  these  instru- 
ments can  be  used  to  pay  taxes  and  all  other  kinds  of 
debts  will  insure  their  circulation  at  par.  If  they  become 
redundant  as  currency,  they  can  be  deposited  with  the 
central  banking  system  and  become  bank  credit  or  be  re- 
issued against  a  surrender  of  a  similar  amount  of  bank 
credit. 

stabilization  in  short,  the  purpose  of  keeping  this  sum  of 
the  reason  for  arbitrary  inflation  in  the  currency  and 

re  aimng  credit  system  is  to  stabilize  it  and  avoid  the 

inflation.  .........  ,        «.     .         ,, 

terrible  injustice  and  suffering  that  must 
result  if  deflation  takes  place. 


_  CURRENCY  AND  BANK  CREDIT  _  233 

"Credit  notes"  The  "Credit  notes"  issued  against  bank 
will  be  credit  will  automatically  be  cancelled  when 

they  *™  return^d  and  are  reconverted  into 
bank  credit,  and  the  latter  will  be  liquidated 
or  "finally"  redeemed  when  it  is  exchanged  for  property 
or  products  taken  out  of  the  market. 

Under  the  plan  proposed  it  is  entirely  probable  that  the 
"Treasury  notes"  will  furnish  all  the  actual  currency  re- 
quired. The  provision  for  "Credit  notes"  is  made  to  take 
care  of  needs  that  might  arise  under  exceptional  circum- 
stances. 

The  extent  of  The  amount  of  representative  credit  instru- 
inflation.  ments  now  in  existence  is  at  present  made 

up  of  all  the  currency  outstanding  plus  the  bank  credits. 
Since  the  currency  has  been  arbitrarily  issued  without 
relation  to  or  diminution  of  bank  credits,  it  follows  that 
the  credit  system  is  inflated  to  the  extent  of  the  total  cur- 
rency issued. 

The  object  in  converting  the  various  kinds  of  arbitrary 
currency  into  one  kind  is  to  stabilize  it  and  thus  keep  the 
credit  system  inflated  to  the  same  extent  at  all  times  as 
it  is  now.  To  effect  this  purpose  it  will  be  necessary  for 
the  Central  Bank  and  its  branches  to  set  up  a  reserve 
against  all  "Treasury  notes"  as  they  come 
Reserves  to  into  ^  possession.  Otherwise  the  deposit 

prevent 


„  ,.  .  ,  .  .,       .,, 

further  °^  *™  currency>  creating  as  it  will  a  corre- 

inflation.  spending  amount  of  bank   credit,   would 

make  it  possible  for  the  Central  Bank  to  loan 
the  currency  itself  and  thereby  increase  the  amount  of  in- 
flation to  the  extent  of  such  loan.  To  illustrate  :  a  deposit 
of  a  thousand  dollar  "Treasury  note"  would  make  a  bank 
credit  of  similar  amount,  and  if  the  note  itself  were 
loaned  there  would  be  credit  instruments  representing 
double  the  amount  of  the  deposit  in  existence.  If,  how- 


234  THE  WAY  OUT 


ever,  the  Central  Bank  system,  upon  the  acceptance  of 
this  deposit,  must  increase  its  reserve  to  the  amount  of 
the  "Treasury  note,"  its  loan  fund  would  only  be  enlarged 
to  the  extent  of  the  amount  credited  to  the  depositor.  In 
effect,  the  "Treasury  notes"  in  the  Central  Bank  would 
not  be  a  loan  fund  at  all,  but  only  a  collateral  security 
against  the  bank  credit  given  the  depositor.  In  this  case 
this  currency  could  only  get  out  of  the  Central  Bank  upon 
the  surrender  of  a  corresponding  amount  of  bank  credit. 

Reserve  against  In  the  case  of  "Credit  notes,"  the  reserves 
"Credit  notes."  woui(j  operate  in  exactly  the  opposite  direc- 
tion. The  reserve  should  be  set  up  against  the  amount  of 
currency  sent  out  instead  of  the  amount  taken  in  as  in  the 
case  of  "Treasury  notes."  The  capacity  of  the  Central 
Bank  to  loan  bank  credit  should  be  diminished  to  the  ex- 
tent that  it  issued  credit  notes  and  vice  versa.  While  it 
is  not  intended  to  deal  here  with  banking  problems,  it 

may  be  said  that  the  handling  of  currency 
banks;  ^y  banks,  unless  properly  restricted  by  laws 

compelling  them  to  set  aside  reserves  to  pre- 
vent the  practice,  gives  them  great  opportunity  to  inflate 
the  loan  fund,  especially  during  periods  of  great  business 
activity.  Knowledge  of  this  fact  suggests  the  inquiry 
and  invites  investigation  as  to  the  extent  of  the  practice, 
the  effect  of  it  upon  the  stability  of  prices,  and  how  far  it 
is  responsible  for  the  intermittent  rise  and  fall  of  busi- 
ness activity. 

Probable  There  is  reason  to  believe  that  unwarranted 

bank  inflation  of  the  loan  fund  by  banks  has  been 

carried  to  a  much  greater  extent  than  is 
generally  supposed,  and  that  the  practice  is  by  no  means 
of  recent  origin,  which  in  turn  suggests  the  query  how 
much  of  the  nominal  increase  in  national  wealth  during 


CURRENCY  AND  BANK  CREDIT 235 

the  last  half  century  is  an  increase  of  genuine  capital  and 
how  much  of  it  is  mere  inflation. 

Booms  and  Booms  and  business  depressions  are  infal- 
depressions  i^fe  Sympt0ms  of  a  defective  currency  and 
impound  credit  system,  and  while  these  recur  we  may 

currency  and  know  of  a  certainty  that  there  is  need  for 
credit  system,  further  analytical  study  and  constructive 
readjustment  of  it.  These  phenomena  will 
continue  to  appear,  most  likely  in  cycles,  until  a  system 
is  devised  that  will  make  the  standard  of  value  in- 
variable. 


Arbitrary          One  thing  at  least  is  clearly  established,  that 

increase  or         any  arbitrary  increase  or  decrease  of  the 

nominal  amount  of  either  currency,  bank 

credit  changes  ...  ,.  ,  -          .,1.111 

standard  credits,  or  the  surplus  of  capital  available 

for  loans,  has  the  direct  effect  of  changing 
the  purchasing  power  of  the  standard  of  value,  seriously 
impairing  the  operation  of  the  credit  exchange  system, 
superinducing  a  train  of  economic  and  financial  disturb- 
ances that  might  be  avoided  by  the  substitution  of  a 
system  more  in  accord  with  sound  economic  principles 
and  with  that  most  emphatic  moral  injunction — thou 
shalt  not  steal. 

Correct  system    This  better  system  would  deny  to  all  the  op- 
admits  neither    portunity  to  inflate  or  deflate  the  currency 

of  inflation          and  foank  credit      and  wpuld  reduce  legiti. 
nor  deflation.  .  .  , ,       .          , ,  , 

mate  banking  to  gathering  the  surplus 
credits  of  the  country  and  lending  what  the  banks  actu- 
ally had,  less  reasonable  reserves,  to  the  end  that  this 
surplus  might  be  employed  all  the  time  in  the  beneficial 
process  of  reproduction  of  capital. 


236  THE  WAY  OUT 


Post  war  The  greater  part  of  the  unfortunate  condi- 

troubies  due       ^jons  following  the  world  war  is  directly  due 

to  the  breakdown  of  the  currency  and  credit 

credit  system.  ...  •          mi      /? 

exchange  systems  of  all  countries.  The  fact 
that  this  general  breakdown  has  occurred  is  sufficient  to 
raise  the  question  of  the  soundness  of  the  system  itself 
and  to  stimulate  investigation  as  to  the  causes  of  its  fail- 
ure to  function  efficiently. 

It  is  well  within  bounds  to  say  that  the  losses  of  the 
world  since  the  war,  on  account  of  currency  and  exchange 
credit  difficulties,  are  second  only  to  those  actually  re- 
sulting during  and  incident  to  the  war  itself.  The  inter- 
ference with  production  and  distribution  occasioned  by 
the  credit  exchange  situation  caused  losses  that  cannot  be 
exactly  determined,  but  even  superficial  examination  will 
show  that  they  were  enormous. 

It  cannot  be  too  emphatically  expressed,  or  too 
strongly  impressed,  that  there  can  be  but  one  basis  for 
the  issue  of  representative  credit  exchange,  that  this  basis 
is  the  values  of  property  and  products  sold  into  the 
market,  and  that  this  credit  exchange,  whether  it  is  in  the 
form  of  currency  or  bank  credit,  must  be  the  evidence  of 
title  to  these  values. 

If  the  evil  effects  of  an  unsound  currency  and  credit 
exchange  system  are  to  be  avoided,  it  is  of  primary  im- 
portance to  ascertain  the  things  that  cannot  serve  as  a 
basis  for  currency  or  bank  credit.  In  this  class  of  non- 
permissible  things  should  be  included : 

1st. — Warehouse  receipts  for  stored  products.  It 
matters  not  what  the  product  may  be  or  who  the  ware- 
houseman is.  It  is  immaterial  so  far  as  the  effect  on 
credit  exchange  is  concerned  whether  the  product  be  gold 
in  the  government  treasury  vaults  or  cotton  in  some 
warehouse,  the  issue  of  currency  or  bank  credit  against 


CURRENCY  AND  BANK  CREDIT 237 

either  has  the  same  evil  effect.  It  changes  the  value  of 
the  standard  and  destroys  its  stability. 

intrinsic  value    It  should  be  remembered,  too,  that  the  in- 

does  not  trinsic  value  of  the  stored  product  does  not 

affect  its  suitability  as  a  basis  for  credit 

duct  as  a  basis  m.  _ 

for  currency,  exchange.  The  product  in  such  case  is 
merely  collateral,  and  even  though  it  may  be 
always  worth  the  value  called  for  by  the  currency  issued 
against  it,  it  is  unfit  for  a  basis  of  currency  issue,  since 
it  is  not  the  solvency  of  the  issue  but  the  fact  of  issue  that 
affects  the  currency  system  adversely,  by  destroying  its 
equilibrium,  which  changes  the  ratio  between  products 
and  debts. 

Effect  upon  The  issue  of  currency  or  bank  credit  against 
prices.  stored  products  in  its  effect  upon  prices  is 

equivalent  to  creating  an  unlimited  demand.  This  arbi- 
trary issue  with  its  false  demand  causes  prices  to  rise 
out  of  all  proportion  to  what  they  would  be  under  the 
operation  of  legitimate  demand.  The  effect  of  such  issues 
is  identical  with  that  of  all  other  forms  of  inflation  of 
the  circulating  medium. 

Debt  public        2d. — Debt  in  all  forms,  whether  that  of  a 
or  private  not     government  or  of  some  organization  operat- 
ing under  its  authority,  can  never  form  a 

basis.  i       •     /.  i_      i  JM. 

proper  basis  for  a  currency  or  bank  credit 
issue. 

Currency  and  At  the  risk  of  repetition,  it  can  be  said  that 
bank  credit  currency  and  bank  credit,  two  forms  of  the 
a  trust  same  thing,  form  a  trust  obligation  of  the 

most  sacred  character  and,  commercially 
speaking,  it  is  strictly  in  accord  with  the  truth  to  say 
that  damnation  follows  inevitably  any  abuse  of  this  trust. 


238  THE  WAY  OUT 


The  terrible  ordeal  through  which  the  people  of  the 
United  States  have  been  passing  during  the  past  two 
years,  and  the  still  more  destructive  experience  of  Euro- 
pean countries  during  the  same  period  are  directly  at- 
tributable to  abuses  of  the  trust  obligation  involved  in 
their  currency  and  exchange  credit  systems. 

Sound  currency  Genuine,  sound  currency  or  bank  credit  rep- 
andbank  resents  title  to  the  value  of  products  and 

li'  property  sold  into  the  market  and  is  there- 

fore as  much  an  evidence  of  title  as  is  a  deed  to  a  piece  of 
real  estate.  The  holder  of  this  evidence  of  title  to  value 
had  necessarily  to  surrender  for  it  property  or  products 
of  equal  value  before  coming  into  possession  of  it.  There 
cannot,  therefore,  be  any  legitimate  issue  of  currency  or 
bank  credit  until  and  after  property  or  products  have 
been  sold,  which  acts  give  rise  to  representative  value. 

Government  Governments  are  not  productive  and  there- 
currency  fore  cannot  issue  currency  except  as  a  debt 
— a  demand  obligation  or  promise  to  pay. 
This  in  no  sense  is  currency  and  has  no  proper  relation 
to  a  sound  currency  system  based  on  representative 
credit. 

Government  The  effect  of  government  issues  of  so-called 
currency  paper  money — which  is  not  money  at  all  but 

not  money.  Qnly  a  public  debt_is  to  destroy  the  invari- 
ability of  the  standard  of  value.  It  impairs  the  obliga- 
tions of  contracts,  and  in  effect  makes  necessary  that  the 
debtor  class  rob  the  creditor  class  while  the  volume  of  the 
issue  is  increasing,  and  likewise  compels  the  creditor  class 
to  rob  the  debtor  class,  doubly,  when  the  volume  of  the 
issue  is  being  decreased. 


CURRENCY  AND  BANK  CREDIT 239 

Currency          3d. — The  issue  of  currency  against  the  de- 

against  deposit    posjt  Of  j^ds  Qr  any  other  f orm  of  coHat- 

f  bonds,etc.,      eral       bHc  Qr  private  is  unsoun(},  for  the 

unsound.  *     .         '. 

reasons  already  given  in  the  discussion  of 
currency  based  on  stored  products. 

The  use  of  Collateral  security  is  entirely  proper  as  se- 
coiiaterai.  curity  for  loans  of  currency  and  bank 
credits  that  have  been  legitimately  created,  but  it  has  no 
proper  relation  to  the  process  of  bringing  such  credits 
into  being. 

Currency  a        If  governments  were  faithful  to  the  solemn 
trust  obligation  involved  in  a  sound  cur- 

necessan  y  rency  and  bank  credit  system,  their  unbal- 
affectedby  %  .  .  ; 

unbalanced  anced  budgets  would  of  course  afreet  ad- 
budgets,  versely  their  financial  obligations  but  would 
have  no  effect  upon  the  circulating  medium. 
Their  credit,  if  they  were  improvident,  would  be  impaired 
and  this  would  be  reflected  in  the  lower  price  of  their 
bonds  and  other  obligations,  but  if  the  exchange  system 
was  kept  separate  and  distinct,  as  it  should  be,  from 
public  debt,  the  currency  and  bank  credits  would  continue 
to  pass  at  par — however  involved  the  government's  finan- 
cial affairs  might  be. 

To  illustrate  the  point  in  the  preceding  paragraph: 
If  A's  outgo  was  greater  than  his  income,  his  credit  would 
become  impaired,  but  if  this  same  party  was  at  the  same 
time  a  trustee,  and  his  trust  accounts  were  in  solvent 
condition,  his  credit  as  a  trustee  would  remain  high.  In 
such  a  case,  A's  individual  paper  would  be  below  par 
while  his  trust  obligations  would  at  the  same  time  be  un- 
impaired. 


240  THE  WAY  OUT 


Government       Governments  are  best  fitted  to  provide  the 

issues  of  organization  for  furnishing  currency,  but 

currency  a  trust  Qnl     ag  a  trugtee  f      ^         U{^     When  ^ 
function.  , .  .  .  .  J 

abuse  this  trust  by  undertaking  to  issue 
their  own  demand  obligations  to  be  used  as  currency  to 
provide  for  their  own  needs  for  capital,  this  act  destroys 
the  hope  of  a  proper  currency  system  and  insidiously 
foists  upon  the  public  a  spurious  currency,  which  is  noth- 
ing more  nor  less  than  a  non-interest-bearing  govern- 
ment debt.  Such  a  practice  has  never  worked  out  satis- 
factorily and  never  will,  because  it  grossly  violates  the 
fundamentals  of  sound  currency. 

European  and     Russia,  Germany,  Austria,  and  other  Euro- 
Amencan          pean  nations  are  held  up  to  ridicule  on  ac- 
s  count  of  their  false  currency  systems,  but 

that  of  the  United  States  of  America  is  only 
better  in  degree.  It  employs  the  same  basic  principle  as 
they  do,  with  this  difference :  They  issue  government  ob- 
ligations to  be  used  as  currency  for  the  purpose  of  getting 
for  government  use  the  capital  that  should  be  gotten 
either  by  taxation  or  legitimate  borrowing,  while  the 
United  States  issues  currency  predicated  on  private  debt, 
guaranteed  by  the  government,  not  for  government  pur- 
pose but  in  order  to  furnish  banks  this  manipulated  and 
false  credit  to  loan.  In  this  way  they  are  enabled  to  loan 
what  does  not  exist.  In  other  words,  the  banks  under  this 
system  "kite"  credit — another  name  for  plain  unvar- 
nished inflation. 


CHAPTER  XII. 

NEXT  STEPS. 

Better  The  controlling  purpose  of  the  preceding 

understanding    chapters  has  been  to  stimulate  thought  on 

the  subjects  discussed  and  to  promote  a 

better  understanding  of  the  principles  that  govern  them. 

Suggested  The  present  aim  is  to  suggest  such  public 
application  policies  as  may  be  in  consonance  with  these 
principles,  to  the  end  that  social  progress 
may  be  secured  in  an  orderly,  evolutionary  way  that  will 
obviate  those  harsher  revolutionary  changes  and  destruc- 
tive reactions  which  always  follow  renewal  of  progressive 
effort  too  long  delayed. 

Past  attitude;     The  first  step  in  the  right  direction  should 
against  j^  an  effor£  ^0  change  entirely  the  attitude 

of  the  law-making  power  toward  coopera- 
tion. In  the  march  upward  from  anarchy,  social  laxity, 
and  inefficiency  to  closer  cooperation,  the  law  has  been 
written  upon  the  assumption  that  cooperation  was  a 
crime  in  itself.  The  Sherman  anti-trust  act,  enacted 
thirty  years  ago,  made  it  a  crime  to  make  any  combina- 
tion that  was  capable  of  being  used  to  restrain  trade. 

Two  classes  The  law  recognizes  two  classes  of  crimes, 
of  crimes,  those  acts  which  are  wrong  in  themselves — 
malum  in  se,  and  those  which  are  right  in  themselves  but 
criminal  only  because  the  constitution  or  statute  makes 
them  so — malum  prohibitum.  The  anti-trust  law  and 
acts  of  similar  character,  in  so  far  as  they  prohibit  acts 
•ight  in  themselves,  evidently  belong  to  the  latter  class. 

241 


16 


242  THE  WAY  OUT 


The  law-making  body  might  with  equal  reason  and  on 
the  same  principle  enact  a  statute  prohibiting  the  use  of 
knives  because  forsooth  some  demented  creature  might 
cut  his  throat  with  one  of  them. 

Law  against  The  best  evidence  of  the  futility  and  stark 
evolution  not  unwisdom  of  such  legislation  is  the  fact  that 
in  the  period  from  the  passage  of  the  pro- 
hibitory law  referred  to  above  to  the  present  time,  more 
combination  has  been  effected  than  in  any  similar  period 
of  previous  history,  and  this,  too,  in  the  teeth  of  laws  for- 
bidding it  under  heavy  penalties !  The  law  and  the  courts 
were  powerless  to  prevent  that  which  the  evolution  made 
mandatory. 

It  is  unthinkable  that  this  could  have  occurred  if  com- 
bination had  been  wrong  in  itself.    What  seems  to  have 
taken  place  was  that  the  legislative  bodies,  in  obedience 
to  an  uninformed  public  opinion,  sought  to  stay  the  march 
of  progress,  and  imposed  upon  the  courts  an 

lourts  given        impossible  tagk  with  the  result  that  the  Jaw 
impossible  n  '      ,,  ..       .  ,    .  ,  , , 

task  remained  practically  a  dead  letter,  and  the 

attempts  to  enforce  it  became  the  subject  of 
jest  and  ridicule. 

VAbuses,  not  Instead  of  prohibiting  combination  and  co- 
sound  operation,  the  policy  of  the  law  should  be  to 
principles  encourage  them.  These  forces  are  the  most 
le  islated  powerful  agents  of  social  uplift.  Without 
against.  them  civilization  would  be  impossible.  The 
recognition  of  a  right  principle  in  no  wise 
commits  one  to  the  abuses  of  it,  and  the  law  might  well 
concern  itself  with  measures  for  the  prevention  of  the  lat- 
ter. Combinations  are  simply  instruments  which  may  be 
used  either  for  proper  or  improper  purposes.  If  the  law- 
makers would  confine  themselves  to  devising  methods  of 


NEXT  STEPS  243 


discovering  and  prohibiting  the  latter,  it  goes  without 
saying  that  their  time  would  be  fully  employed  and  the 
results  of  their  labors  would  be  far  more  effective.  The 
strength  of  the  strong  is  not  denied  him  because,  perforce, 
he  might  use  it  to  despoil  his  weaker  neighbor.  Action 
against  him  is  deferred  until  he  has  actually  done,  or 
shown  unmistakable  signs  of  doing,  something  that  would 
prove  injurious  to  others.  The  combination  is  but  an  ag- 
gregation of  individuals,  and  the  same  policy  that  applies 
to  the  one  should  apply  to  the  other. 

Unwise  laws  The  law  against  combination  furnishes  a 
£lve  rather  striking  example  of  the  fact  that 

laws  or  acts  predicated  upon  an  unsound 
results.  .  r.  , 

premise  sometimes  produce  quite  unex- 
pected results.  The  object  of  this  law  was  to  prevent  the 
enlargements  of  the  units  of  production  and  distribution, 
ostensibly  to  forestall  the  abuses  against  the  public  that 
such  concentration  of  power  in  private  hands  would  make 
possible,  but  the  actual  force  behind  this  restrictive  legis- 
lation was  more  likely  the  efforts  of  the  smaller  units  to 
prevent  the  destructive  competition  that  they  feared  from 
larger  operation. 

Combination  Regardless  of  the  law  greater  combination 
has  come  in  jias  come>  frequently  merging  many  small 
-  units  into  a  single  unit.  The  large  unit  has 
now  acquired,  or  can  acquire  without  fur- 
ther combination  of  units,  all  the  capital  that  it  requires, 
and  possessing  all  the  advantages  that  attach  to  large  op- 
eration, it  has  the  smaller  units  at  a  serious  economic  dis- 
advantage, and  may  now  invoke  against  them  this  same 
law  to  prevent  them  from  combining  to  protect  them- 
selves against  their  more  powerful  competitor.  A  rather 
good  example  of  being  hoist  with  one's  own  petard.  The 


244  THE  WAY  OUT 


most  powerful  combination  now  has  least  to  fear  from 
this  policy  of  repression.  It  is  now  the  smaller  units, 
desiring  as  a  defensive  measure  to  get  together,  who  will 
most  likely  feel  the  stinging  blows  of  the  lash  which  they 
so  gladly  prepared  for  the  backs  of  their  more  ambitious 
rivals. 

*/  Laws  for  Better  results  may  be  expected  from  laws 

social  that  are  in  consonance  with  right  principles 

and  that,  on  the  corrective  side,  concern 
themselves  only  with  the  detection  and  punishment  of 
acts  which  are  wrong  in  themselves.  Constructively, 
laws  should  provide  methods  for  proper  social  expression, 
i.  e.,  there  should  be  provided  a  lawful  way  by  which  any 
right  thing  may  be  done. 

Adapting  The  constructive  statesman  in  adapting  leg- 
laws  to  a  islation  to  present  situations,  must  con- 
stantly take  into  consideration  the  existing 
need  and  the  present  state  of  economic  and  social  evolu- 
tion. The  ideal  should  be  retained,  but  that  is  the  shadow 
line  in  the  dim  distance  which,  like  the  horizon,  recedes 
as  it  is  approached.  The  paramount  purpose  should  be 
the  continuous  development  of  cooperation  and  the  sub- 
stitution of  public  initiative  for  private  whenever  the 
latter  has  reached  the  point  of  economic  development 
where  its  inherent  weaknesses  and  evils  overbalance  the 
good  that  it  can  accomplish  as  an  imperfect  agency  for 
the  extension  of  the  cooperative  principle. 

institutions  In  this  connection,  it  should  be  remembered 
born,  not  that  institutions,  like  poets,  are  born,  not 

made,  and  that  ready-made  models  do  not  as 
a  rule  fit  the  environment  in  which  they  are  intended  to 
function.  This  being  true,  both  practicability  and  prac- 


NEXT  STEPS  245 


ticality  become  matters  of  vital  importance  in  all  propo- 
sitions involving  radical  departure  from  the  established 
order. 

While  these  complications  do  not  furnish  any  valid 
reason  for  the  undue  retardation  of  sane  progression, 
they  do,  nevertheless,  suggest  proper  enquiry  and  pains- 
taking effort  to  adjust  the  new  order  to  the  old  so  as  to 
avoid  all  unnecessary  jar  in  the  social  service  system  and 
any  hiatus  in  the  service  itself. 

Social  The  work  of  social  development  may  be  di- 

deveiopment      vided  as  it  relates  to  matters  of  local,  state, 

oca  state,         national,  and  international  concern.    Coop- 
national  and  .       .„  -  , 
international      ^ration,  ii  successiul,  must  servp  a  common 

interest,    hence    it   will   develop   least   in 
sparsely  settled  communities. 

Rural  In  rural  districts,  the  best  field  for  such  en- 

districts,  deavor  will  likely  be  found  in  cooperative 

action  to  promote  education,  health  work,  civic  better- 
ment, production,  cooperative  buying  and  selling,  and 
recreation.  The  schoolhouse  should  be  made  the  social 
centre  from  which  the  effects  of  all  of  these  activities 
should  radiate. 

Mere  literacy  Mere  literacy,  only  a  means  to  an  end, 
a  means  to  should  cease  to  be  regarded  as  an  end  in 
itself.  The  effort  should  be  to  develop 
thought,  and  if  possible,  increase  the  power  to  think,  so 
that  all  things  that  affect  life  may  receive  that  intelligent 
consideration  so  vitally  important  to  individual  and  social 
growth. 

A  democratic  The  school  system  should  be  democratically 
school  system,  organized  so  that  responsibility  and  leader- 
ship in  matters  of  local  concern  would  devolve  upon  the 


246  THE  WAY  OUT 


people  most  directly  interested.  The  effect  of  this  policy 
instead  of  conflicting  with  or  enervating  general  manage- 
ment would  be  most  helpful  in  making  it  doubly  efficient 
by  furnishing  a  local  organization  for  carrying  cooper- 
ative policies  from  whatever  source  into  effect. 

Develop  in  Each  community,  whether  rural  or  urban, 
accord  with  should  undertake  to  develop  along  the  lines 
local  interests.  of  iis  QWn  pecuiiar  interests.  The  general 

principles  may  remain  the  same,  but  the  methods  of  ap- 
plication and  the  subjects  considered  and  stressed  should 
be  adapted  to  the  needs  of  the  locality.  It  would  be  a 
waste  of  time  to  teach  agriculture  to  industrial  workers 
or  vice  versa. 

The  service  Cities  with  greater  density  of  population 
principle  in  an(j  the  more  closely  knit  organization  that 
it  compels  are  well  prepared  for  an  exten- 
sive application  of  the  service  principle.  It  is  surprising 
that  this  has  not  already  taken  place  to  a  greater  extent. 
Just  why  a  community  should  burden  itself  with  graft, 
political  corruption,  boss  government  and  exploitation, 
when  by  a  little  organization,  and  the  use  of  its  own 
wealth  and  credit  for  its  own  protection  and  benefit  it 
could  get  rid  of  such  undesirable  and  demoralizing  in- 
fluences, is  an  enigma  which  suggests  searching  enquiry 
as  to  the  intellectual  and  moral  capabilities  of  its  citizen- 
ship. 

Public  There  appears  to  be  no  reason  in  the  services 

ownership  and  themselves  that  would  prevent  the  public 
opera  ion.  ownership  and  operation  of  a  city's  public 
service  institutions.  The  successful  operation  of  heat, 
light,  water,  gas  plants,  and  transportation  systems  in- 
volves nothing  more  than  sufficient  capital,  proper  organ- 


NEXT  STEPS  247 


ization  and  efficient  management,  all  of  which  are  within 
the  reach  of  the  average  city.  Under  these  circum- 
stances, the  failure  of  the  city  to  provide  such  public  ser- 
vice, making  it  necessary  to  burden  the  people  with  the 
tribute  that  private  monopoly  must  impose,  is  a  reflection 
upon  the  community  itself. 

The  city  The  general  spread  of  the  idea  of  better 

manager  municipal  organization,  as  indicated  by  the 

many  adoptions  of  the  plan  for  the  adminis- 
tration of  the  affairs  of  cities  by  city  managers,  is  a  most 
hopeful  indication  of  civic  awakening  and  progress.  The 
concentration  of  power  and  responsibility  that  this  plan 
connotes  makes  possible  the  employment  of  initiative  and 
an  attainment  of  efficiency  that  will  go  far  in  promoting 
the  growth  of  public  opinion  favorable  to  more  extensive 
application  of  the  service  principle.  The  world  waits  for 
some  agency  to  do  its  work  and  it  goes  to  the  hands  that 
will  do  it  best.  Once  demonstrate  that  a  city  can  do  these 
things  for  itself  better  and  cheaper  than  private  agencies 
can  do  them  for  it  and  the  latter  will  be  forced  from  the 

field. 

• 

Possibilities  For  reasons  previously  given,  the  separate 
of  state  action  states  have  only  a  limited  opportunity  to 
engage  in  socialistic  enterprise.  In  case  the 
state  undertakes  it,  capitalism  presents  a  solid  front  in 
opposition,  and  if  the  state  should  be  dependent  upon  pri- 
vate parties  for  any  considerable  amount  of  capital  it  will 
likely  experience  great  difficulty  in  supplying  its  needs. 
Having  the  power,  special  privilege  will  not  hesitate  to 
coerce  the  state  to  the  extent  necessary  to  defeat  its  pur- 
pose to  limit  exploitation. 


248  THE  WAY  OUT 


Capitalism  The  attitude  of  capitalism  toward  states' 
and  ^  rights  is  best  illustrated  by  the  course  pur- 

rights'  sued  by  the  railroads  in  the  matter  of  rate 
regulation.  In  1906  when  the  Hepburn  rate  bill  was 
under  discussion,  the  roads  were  ardent  advocates  of  local 
government  and  states'  rights,  presumably  because  under 
the  proposed  plan  of  Federal  regulation  they  anticipated 
that  the  Interstate  Commerce  Commission  would  wield 
the  rod  of  correction  with  more  force  than  state  commis- 
sions had  done  or  could  do.  Some  of  their  spokesmen 
went  so  far  as  to  denounce  Federal  regulation  as  "com- 
mercial lynch-law,"  but  a  new  light  broke  upon  them 
after  the  law  was  passed. 

Railroads  The  roads  were  agreeably  surprised  to  find 
surprised.  y^  }£  required  less  time  and  energy  to  un- 
dertake to  establish  the  soundness  and  probity  of  their 
propositions  before  one  central  commission  having  juris- 
diction coextensive  with  the  country,  than  it  had  formerly 
done  to  accomplish  the  same  result  before  forty-eight 
separate  commissions  whose  jurisdictions  were  limited  to 
their  respective  states. 

Change  of  Presto,  their  views  changed  overnight  and 
base-  they  became  as  earnest  in  their  advocacy  of 

enlarging  the  power  of  the  central  authority  as  they  had 
before  been  in  their  opposition  to  it.  As  to  states'  rights, 
so  far  as  the  roads  cared,  they  might  go  hang. 

Rapid  concen-  Evidence  is  not  lacking  that  the  roads  have 
tration  of  made  substantial  progress  in  getting  public 
power*  policy  brought  into  line  with  their  revised 

program  of  centrallization,  since  the  Interstate  Com- 
merc  Commission  is  not  only  naming  interstate  rates  but 
is  commanding  the  state  commissions  to  bring  intrastate 
rates  into  proper  relation  to  them. 


NEXT  STEPS  249 


The  courts  have  sustained  the  power  of  the  Interstate 
Commerce  Commission  to  compel  the  state  commissions 
to  obey  its  orders  as  to  intrastate  rates,  and  by  this  de- 
cision have  scrapped  the  idea  of  a  federal  government  of 
limited  powers  made  up  of  an  association  of  sovereign 
states.  This  is  only  another  of  the  many  instances  that 
sustain  the  view  that  economic  necessity  or  power  domi- 
nates political  power,  however  fundamental  the  matter 
may  be.  Economic  necessity  brings  the  political  struc- 
ture into  accord  with  its  demands,  written  constitutions 
to  the  contrary  notwithstanding. 

Economic          The   large   business   units   under   private 

power  initiative  are  potentially  greater  than  the 

separate  states,  and  therefore  state  action 

state  power.         .   r       .       ..        ..  ,.  ...    . 

in   this   direction   would   most   likely   re- 
sult in  failure. 

Statr  The  most  promising  prospect  for  the  exten- 

communism.  sj[on  Of  state  f uncti0n  lies  in  the  direction  of 
communism.  Public  education  and  public  health,  pro- 
vision and  care  for  the  dependent  classes,  the  detention 
and  care  of  prisoners,  the  building  and  upkeep  of  public 
roads,  and  other  things  of  like  character,  are  all  purely 
communistic,  that  is  to  say,  they  require  that  the  contri- 
bution shall  be  according  to  strength  and  the  distribution 
according  to  need.  These  things  cannot  function  under 
the  profit  principle  and  therefore  the  state  meets  no  or- 
ganized opposition  in  this  field,  except  as  to  the  amount 
of  the  tax  levied  to  support  these  activities. 

Health  work      It  may  be  said,  while  on  the  subject,  that 
and  schools        education  and  health  work  are  only  differ- 
ent parts  of  the  same  thing.    They  should  be 
more  closely  related  than  they  have  been  in  the  past.    The 


250  THE  WAY  OUT 


failure  to  realize  the  vital  importance  of  giving  more  at- 
tention to  the  health  of  school  children  is  responsible  for 
the  waste  of  enormous  amounts  upon  those  who  are  in- 
capacitated by  remediable  defects  and  diseases. 

Support  for  The  support  of  the  schools  and  health  work 
schools  and  should  come  largely  from  the  state  and  the 
health,  state  and  eral  government,  since  they  alone  have 

national.  f,  ,    .,  ,,,    .        in 

the  power  to  reach  the  wealth  in  all  sections 
and  distribute  it  uniformly  where  the  need  exists.  There 
is  of  course  no  objection  to  localities  supplementing  these 
contributions,  but  only  after  the  state  and  nation  have 
done  all  that  they  should  do. 

increase  of  As  cooperation  progresses,  the  constant  ten- 
government  dency  is  to  increase  the  functions  of  all  the 
divisions  of  government.  The  local  govern- 
ment continues  to  introduce  new  activities  and  also  to  de- 
velop those  previously  started,  so  that  they,  in  many 
cases,  become  a  part  of  the  state's  work;  and  the  state 
pursuing  the  same  course,  matters  of  purely  intrastate 
concern  finally  become  interstate  and  come  under  the 
general  government.  This  change  of  relation  takes  place 
whether  the  operation  is  under  private  or  public  initia- 
tive. 

Growth  and  The  small  business  serves  the  locality,  but 
extension  of  if  ft  continues  to  grow  it  will  spread  first 
over  adjacent  localities,  then  the  state,  and 
finally  become  national  and  even  international  in  its  rela- 
tions. For  this  reason  the  greater  part  of  the  task  of 
making  economic  readjustments  will  naturally  become 
the  duty  of  the  national  government,  and  it  is  in  this 
forum  that  the  larger  causes  will  finally  be  determined. 


NEXT  STEPS  251 


Conservative  There  are  perhaps  even  now  many  things 
progression.  under  private  initiative  which  are  suffi- 
ciently developed  to  warrant  putting  them  under  the  ser- 
vice system,  but  conservatively  progressive  leadership 
will  no  doubt  conclude  that  a  few  things  undertaken  and 
done  well  would  in  the  long  run  prove  a  better  policy  than 
to  invite  the  confusion  that  might  result  from  trying  to 
do  too  much  at  once. 

Fields  for  Whenever  the  general  government  decides 
nationalization.  to  introduce  the  service  system,  it,  like  the 
fruit  grower,  should  gather  the  ripest  first.  The  rail- 
roads, banking  and  currency,  telegraph  and  telephone 
systems,  and  the  coal  industry  present  inviting  fields  for 
experimentation  in  nationalization.  There  are  many 
reasons,  economic,  financial,  and  political,  why  these 
things  should  be  brought  under  the  service  principle  as 
early  as  possible. 

One  system  The  different  railroads  should  be  parts  of 
of  railroads.  one  SyStem  so  that  all  unnecessary  duplica- 
tion could  be  eliminated.  There  is  no  way  by  which 
maximum  efficiency  can  be  attained  while  thousands  are 
engaged  in  doing  for  the  separate  roads  what  a  much 
smaller  number  could  do  better  for  a  single  system  com- 
prising the  entire  mileage  of  the  country.  If  there  were 
only  one  unified  system,  freight  would  be  sent  by  the 
shortest  route  or  at  least  by  that  which  involved  the  low- 
est cost,  millions  would  be  saved  by  the  elimination  of 
the  unnecessary  appendages  that  are  now  required  to  get 
business  for  the  separate  lines  and  to  keep  accounts  of 
the  numberless  adjustments  that  division  of  management 
and  interest  makes  necessary.  It  is  hardly  an  exagger- 
ation to  say  that,  if  the  salaries  of  the  official  and  legal 


252  THE  WAY  OUT 


staffs  that  could  be  easily  dispensed  with  under  govern- 
ment ownership  were  deducted  from  rates,  an  appreciable 
difference  would  be  made  in  them. 

Efficient  Under  this  plan  the  rolling  stock  would 

operation.  work  with  greater  efficiency,  which  is  equiv- 
alent to  saying  that  less  investment  would  have  to  be 

made  to  furnish  it.  The  greatest  saving 
savin  s  would  likely  be  on  the  financial  side.  The 

change  would  at  once  put  the  banking  in- 
terests out  of  the  railroad  business.  There  is  abundant 
evidence  available  to  prove  that  the  major  part  of  the 
railroad  shortcomings  are  found  here,  vide  New  York, 
New  Haven  and  Hartford,  and  many  other  cases,  where 
banking  interests  have  wrecked  the  properties  upon 
which  they  got  their  clutches.  They  use  these  instru- 
ments of  public  service  for  the  purpose  of  collecting 
tribute  from  the  highest  to  the  lowest.  It  might  be 
thought  that  the  stockholders  are  the  beneficiaries  of  this 
imposition  but  the  indications  are  to  the  contrary.  The 
prices  of  railroad  stocks,  and  the  amount  of  dividends 
paid,  are  strongly  indicative  that  the  financial  jugglers 
see  to  it  that  the  most  of  what  is  gotten  from  the  public 
is  safely  anchored  before  it  ever  gets  to  the  stockholder. 
The  proverbial  poor  widow  and  orphan,  who  have  so  often 
been  apostrophized  by  eloquent  pleaders  for  private  own- 
ership, must  now  count  themselves  fortunate  if  they  get 
a  small  dividend,  since  in  many  cases  they  get  nothing. 

The  public  may  lose  money  by  having  to  pay  exorbitant 
rates,  the  stockholders  may  lose  by  the  road's  failure  to 
have  sufficient  net  earnings  to  pay  dividends,  but  it  is 
safe  to  say  that  the  banking  interests  which  control  the 
roads,  and  which  of  all  are  most  insistent  upon  keeping 
them  in  their  hands,  are  sufficiently  satisfied  with  their 
returns  to  induce  them  to  continue  the  present  arrange- 


NEXT  STEPS  253 


ment.  On  the  surface  it  appears  that  they  have  made 
national  beggars  of  the  railroads,  ever  asserting  the 
claim  that  they  are  on  the  verge  of  starvation. 

Railroad's  tale  Dressed  in  the  conventional  tatters  of  the 
of  woe.  alms-seeker,  unkempt  and  unwashed,  the 

railroads  are  constantly  paraded  before  an  always  sym- 
pathetic and  sometimes  simple  public  to  tell  their  oft  re- 
peated tale  of  woe  and  ask  that  they  be  saved  from  de- 
struction. Strangely  enough  their  appeal  is  generally  ef- 
fective. Whether  the  managers  of  the  show  use  the  re- 
ceipts to  pay  larger  profits  on  purchases  from  the  enter- 
prises which  they  control,  or  to  pay  the  price  of  financial 
assistance,  is  not  material.  The  pertinent  fact  seems  to 
be  that  the  public  and  the  ordinary  stockholder  have  little 
consideration  when  the  final  settlement  is  made. 

Banking  The  fact  that  railroads  are  indispensable, 

control  no         faat  ^he  present  state  of  social  development 

could  not  be  sustained  if  they  ceased  to  f  unc- 

transportation.  tion  fairly  efficiently,  furnishes  no  valid 
reason  why  they  should  be  left  under  the 
control  of  the  banking  interests,  which  apparently  are 
using  them  as  a  cat's  paw  to  drag  chestnuts  out  of  the 
fire  for  their  own  delectation  and  profit.  Agencies  of 
any  kind  have  an  excuse  for  existence  only  so  long  as  they 
are  the  most  efficient  that  society  can  command  for  the 
particular  work  assigned  to  them.  There  may  have  been 
a  period  in  the  life  of  railroads  when  the  bankers,  how- 
ever expensive  and  wasteful  the  service,  were  quite  neces- 
sary to  the  development  of  the  transportation  system,  but 
it  is  no  longer  true.  There  does  not  now  remain  a  vestige 
of  reason  why  the  people  of  the  United  States  should  per- 
mit the  transportation  business,  affecting  as  it  does  every 
interest  from  the  highest  to  the  lowest,  to  be  transacted 


254  THE  WAY  OUT 


on  the  basis  of  a  financially  embarrassed  concern  that 
finds  itself  compelled  to  submit  to  loan-shark  exactions. 
Every  consideration  of  sound  economics,  enlightened 
public  policy,  and  a  proper  regard  for  public  safety,  de- 
mands that  the  transportation  system  of  the  country  shall 
be  taken  out  of  the  hands  of  private  banking  interests  and 
made  independent  of  them. 

No  entangling  It  cannot  be  too  strongly  emphasized  that,  if 
alliances  public  ownership  and  operation  are  adopted, 

between  the  change  should  be  clear  cut,  that  is  to  say, 

p^ean  that  there  should  be  no  entangling  alliances 
interest  w^h  Priva^  interests,  since  the  latter  on 

principle  must  of  necessity  be  an  antagonis- 
tic element  that  would  continually  work  to  the  detriment 
of  public  ownership  and  operation. 

Government  ownership  of  the  railroads,  resulting  as  it 
would  likely  do,  in  the  adoption  of  a  single  classification 
of  freight  in  place  of  the  three  general  classifications  and 
the  various  local  classifications  and  exceptions  now  in 
use,  would  put  rates  upon  a  mileage  basis.  Each  locality 
would  then  stand  upon  its  own  economic  foundation  and 
its  development  would  be  normal. 

Policy  of  Much  of  the  movement  of  population  from 

congestion.  the  rural  districts  to  large  centres  is  directly 
attributable  to  the  transportation  policy  adopted  by  the 
railroads,  which  by  giving  preferential  treatment  in  ser- 
vice and  rates  to  selected  localities  has  concentrated  man- 
ufacture and  commerce  in  these  favored  spots. 

Effects  of  If  the  government  owned  the  roads  and 
equal  treated  all  sections  and  localities  alike,  giv- 

ing  to  each  the  service  to  which  !t  is  Justly 

entitled,  this  policy  would  certainly  have  a 
most  pronounced  and  far-reaching  effect  upon  our  civili- 


NEXT  STEPS  255 


zation.  Congestion  would  disappear  and  the  growth  of 
small  towns  and  villages  would  be  greatly  promoted.  This 
policy  would  also  have  a  profound  effect  upon  the  general 
marketing  system  of  the  country  and  upon  the  habits 
and  customs  of  the  people. 

Smaller  units  Under  such  a  plan,  the  growth  of  the  larger 
of  production  units  of  manufacture  and  commerce  would 
in  most  cases  be  retarded  and  in  others  ar- 
rested, and  many  smaller  operations  would  find  it  pos- 
sible to  meet  successfully  the  competition  of  the  larger 
aggregations  that  have  been  promoted  by  the  preferential 
policy  now  in  vogue. 

Would  regulate  The  introduction  of  this  system  would  do 
trusts.  more  to  regulate  the  so-called  trusts  than  all 

the  restrictive  laws  that  ever  have  been  passed.  The 
effect  would  be  a  general  slowing  down  of  the  movement 
toward  centralization  that  otherwise  will  in  a  short  time 
drive  society  to  a  nationalization  of  industry  or  to  a  rev- 
olution, perhaps  both.  The  present  transportation  policy 
has  unduly  stimulated  the  concentration  of  industry  and 
commerce,  and  in  these  cases  has  superinduced  an  un- 
healthy growth.  In  business  as  in  other  forms  of  growth, 
the  more  normal  development,  even  if  slower,  is  prefer- 
able. Public  policy  should  encourage  cooperation,  but 
only  to  the  extent  of  giving  it  an  opportunity  to  develop  in 
ways  that  involve  no  contravention  of  the  rights  and  im- 
munities of  others.  It  should  be  given  a  square  deal — 
nothing  more,  nothing  less. 

Nationalization  Nationalization  of  railroads  is  considered 

of  railroads        by  many  as  a  radical  measure,  but  taken  in 

connection  with  the  effects  of  this  policy 

upon  the  industry  and  commerce  of  the  country,  it  is 


256  THE  WAY  OUT 


ultra  conservative,  not  to  say  actually  reactionary.  It 
would  make  impossible  the  realization  of  the  dream  of 
the  extreme  radical,  who  impatiently  awaits  the  national- 
ization of  practically  everything. 

Credit  and  The  f  ramers  of  the  United  States'  Constitu- 
currency.  ^jon  apparently  recognized  the  imperative 
necessity  of  reserving  to  the  Federal  government  the 
power  to  "coin  money,  regulate  the  value  thereof,  and  of 
foreign  coin  and  fix  the  standard  of  weights  and  meas- 
ures." They  understood  the  evil  effects  that  inevitably 
follow  the  use  of  a  variable  standard  and  therefore  gave 
the  power  to  Congress  alone  to  fix  it,  both  in  the  matter  of 
weights  and  measures.  It  does  not  appear  that  they  con- 
templated that  the  Federal  government  should  issue  any 
paper  currency,  except  as  an  exercise  of  its  power  to  bor- 
row money  on  the  credit  of  the  United  States.  It  is  quite 
plain  that  they  had  no  adequate  comprehension  of  a 
purely  representative  credit  system  and  the  credit  cur- 
rency that  it  requires. 

Power  of  It  is  true,  however,  that  they,  in  vesting  the 

Congress  power  in  Congress  to  fix  the  standard  of 

weights  and  measures,  adopted  a  principle 
that  fully  authorizes  any  action  that  Con- 
gress may  take  to  effect  the  purpose.  If  the  creation  by 
the  Federal  government  of  a  representative  exchange 
system,  involving  the  issue  of  paper  currency,  is  a  neces- 
sary part  of  the  exercise  of  its  power  to  fix  the  standard 
of  the  measure  of  value,  it  has,  under  Chief  Justice  Mar- 
shall's principle  of  interpretation,  the  unquestionable 
power  to  do  so.  It  does  not  appear  that  the  Federal  gov- 
ernment has  power  to  issue  currency  for  any  other  pur- 
poses than  the  two  stated  above,  and  since  its  issue  of  it  to 
borrow  money  on  the  credit  of  the  United  States  makes 


NEXT  STEPS  257 


it  impossible  to  fix  a  stable  standard  of  credit  exchange 
value,  it  is  morally,  at  least,  restricted  to  the  single  pur- 
pose of  issuing  it  for  representative  credit  exchange, 

No  power  to  If  Congress  has  power  to  borrow  and  to 
lend  public  issue  currency  as  evidence  of  debt,  it  goes 
credit  for  without  saying  that  this  must  be  done  for 

private  use.  ,  __..         „         .  . 

governmental  use.  Therefore  there  appears 
to  be  no  constitutional  authority  for  such  practice  when  it 
is  for  private  use,  as  is  now  done  under  the  Federal  Re- 
serve act.  Vesting  power  in  Congress  to  borrow  by  no 
means  carries  with  it  by  implication  or  otherwise  the 
authority  to  lend,  more  especially  when  the  government 
has  no  interest  in  the  use  to  which  the  loan  is  to  be  put. 

It  is  a  source  of  astonishment  that  there  should  still 

exist  such  a  widespread  idea  that  a  government  has  but  to 

put  its  printing  presses  to  work  to  create  value,  and  that 

it  can  shovel  out  all  the  capital  that  may  be  required  to 

satisfy  both  the  needs  and  the  wants  of  its  population. 

How  long  will  it  be  before  the  public  de- 

velops common  sense  enough  to  know  that  a 

cannot  make  ° 


,    ,.,  .     ,.  ,  ,         , 

something  out  government,  ute  &n  individual,  cannot  make 
of  nothing.  something  out  of  nothing,  and  that  its 
source  of  acquisition  resides  in  its  power  of 
taxation,  therefore  it  can  have  nothing  to  lend  unless  it 
first  takes  it  from  someone  else. 

No  proper          There  is  legitimately  no  sort  of  relation  be- 

relation  tween  a  proper  currency  system  and  public 

debt.    These  two  things  should  be  kept  abso- 

sysTmTnd  lutely  distinct-     If  this  were  done>  the  CUr" 

public  debt.        rency  of  the  country  would  remain  stable 

regardless  of  the  condition  of  the  market  for 

government  securities.     In  this  method  of  dissociation 


258  THE  WAY  OUT 


of  public  debt  from  currency  lies  the  best  hope  for  the 
rehabilitation  of  the  currency  systems  of  the  practically 
bankrupt  nations  of  Europe. 

An  It  would   greatly   facilitate   international 

international  trade  if  a  single  standard  of  value,  inter- 
national bank  credits,  and  an  international 
currency  were  provided.  The  organization 
of  such  an  international  system,  according  to  the  prin- 
ciples discussed  in  the  proposition  to  inaugurate  a  purely 
representative  bank  credit  and  currency  system  for  the 
nation,  would  present  less  difficulty  than  in  the  latter 
case,  because  there  exists  no  international  system  of  ex- 
change that  would  have  to  be  amended  or  abolished.  The 
first  step  would  be  the  selection  of  a  standard  of  interna- 
tional value.  To  illustrate :  call  the  unit  of  value  "unum," 
one  tenth  of  it  "decimum,"  one  hundredth  of  it  "centesi- 
mum."  This  would  give  a  decimal  system  with  "unum" 
as  the  name  of  the  unit.  The  ratios  of  all  countries  could 
be  arranged  as  follows : 

1  dollar  =1  "unum" 

1  pound  sterling  =4.8665  "unum" 

1  mark  =    .238  "unum" 

1  franc  =    .193  "unum"  etc. 


Each  country  could  adopt  as  the  ratio  of  its  local  cur- 
rency to  that  of  the  international  system  the  same  ratio 
that  it  formerly  had  under  the  gold  standard  system. 
Each  nation  is  familiar  with  this  value  and  could  readily 
adapt  itself  to  the  new  system. 

All  quotations,  contracts  and  sales  in  international 
trade  would  be  in  the  denominations  of  the  new  system, 
and  the  adjustment  that  might  be  necessary  on  account  of 
deranged  local  currencies  would  be  a  matter  for  local  de- 
termination, but  it  would  not  in  any  way  affect  inter- 


NEXT  STEPS  259 


national  transactions.  In  other  words,  the  international 
standard  would  furnish  an  invariable  measure  of  the 
value  of  the  products  entering  into  international  trade. 

If,  for  instance,  a  Frenchman,  German,  or  English- 
man quoted  an  American  a  certain  article  at  so  many 
"unums"  per  pound,  yard,  or  gallon,  the  latter  would  not 
concern  himself  either  with  the  solvency  of  the  particular 
country  from  which  the  quotation  came  or  the  stability 
of  the  value  of  its  internal  currency.  The  only  things 
that  would  interest  him  would  be  the  soundness  and  sta- 
bility of  the  international  credit  and  currency  system, 
and  the  value  of  the  international  unit  translated  into 
that  of  his  own  country. 

Under  such  an  arrangement  all  international  business 
could  be  done  under  a  single  standard,  and  credits  arising 
under  it  could  be  transferred  to  any  part  of  the  world 
where  it  was  in  vogue.  If,  for  instance,  England  bought 
from  Russia  and  Russia  in  turn  bought  from  Brazil,  the 
international  credit  agency  by  a  transfer  of  credits  to 
Brazil  could  settle  the  entire  transaction.  Such  a  system 
would  not  be  confined  to  adjusting  trade  balances  be- 
tween any  two  countries  but  would  be  a  clearing  house  for 
the  world's  international  transactions. 

It  is  obvious  that  this  system  would  require  the  organi- 
zation of  banks  in  every  country,  or  at  least  that  the 
system  should  have  working  connections  there. 

international  The  sale  of  goods  in  the  international 
currency  and  market  would  give  rise  to  international 
bank  credits  which  in  turn,  if  it  were  found 
useful,  could  be  converted  into  international  currency, 
thus  making  these  two  forms  of  such  credit  intercon- 
vertible. It  would  of  course  be  necessary  in  the  case  of 
the  issue  of  currency  to  set  up  a  reserve  against  it,  to 


260  THE  WAY  OUT 


prevent  the  inflation  that  would  result  from  the  use  of 
both  the  currency  and  the  bank  credit. 

The  international  banks  should  keep  the  bank  credit 
and  currency  department  absolutely  distinct  from  their 
regular  banking  operations,  such  as  discounting  time 
drafts,  the  loaning  of  surplus  credits,  etc.  Such  an  insti- 
tution should  be  jointly  guaranteed  by  the  governments 
of  the  principal  trading  nations,  so  as  to  give  the  confi- 
dence necessary  to  make  its  obligations  pass  current  any- 
where in  the  civilized  world. 

international  Once  this  system  were  inaugurated,  the 
prices.  goods  entering  into  international  trade 

would  soon  be  quoted  in  the  new  standard  of  value,  and 
the  rise  or  fall  of  the  value  of  the  national  currencies 
would  be  of  no  international  concern  or  effect.  In  other 
words,  if  a  nation's  currency  became  absolutely  worth- 
less, it  would  not  interfere  with  its  citizens  exporting 
their  goods  sold  by  the  international  standard  and  receiv- 
ing international  currency  in  payment  for  them.  It  is 
only  intended  here  to  make  crude  suggestion.  The  de- 
tails can  be  worked  out  by  financial  technicians  when  the 
matter  becomes  a  practical  question. 

The  principles  involved  have  already  been  discussed  in 
the  chapter  on  Currency  and  Bank  Credit,  but  it  cannot 
be  too  strongly  emphasized  that  the  present  currency 
system  is  fundamentally  unsound  in  many  respects,  and 
that  the  so-called  gold  standard  system  should  be  dis- 
carded at  the  earliest  moment,  lest  America  have  the  sad 
awakening  that  comes  always  to  him  who  overstays  his 
market. 

Who  believes  that  the  poverty  stricken  nations  of 
Europe,  when  the  time  comes  for  readjusting  their  cur- 
rency systems,  and  come  it  will,  will  undertake  to  pur- 
chase sufficient  gold  to  form  the  basis  of  their  currency 


NEXT  STEPS  261 


systems  when  they  can  construct  infinitely  better  ones 
without  the  investment  of  anything  for  that  purpose? 

Great  Britain     Great  Britain  may,  and  no  doubt  will  do  all 
possible  to  preserve  the  gold  standard  with 
its  unjustifiable  use  of  gold  since  sixty  to 
seventy  per  cent  of  the  world's  production  of  gold  is  with- 
in her  empire.  Other  nations,  once  they  have  seen  the  way 
out,  will  not  likely  help  her  sustain  the  monopoly  price  on 
gold  that  enables  her  to  sell  it  at  perhaps  double  what  it 
would  bring  in  a  free  market  after  its  use  as  money  had 
been  discontinued. 

Creation  of  This  country  has  already  deferred  too  long 
putting  its  house  in  order,  and  further  delay 
will  not  make  the  consequences  less  serious 
when  the  storm  does  break  upon  us.  The  taking  over  of 
the  Federal  Reserve  banks  by  the  government  and  the 
creation  of  a  Central  Bank  under  which  they  would  func- 
tion seem  to  offer  the  first  steps  in  the  easiest  way  out  of 
the  wilderness.  The  inauguration  of  the  system  of  cur- 
rency discussed  in  a  previous  chapter  would  insure  a 
reasonably  safe  transition  from  the  one  system  to  the 
other. 

Telephone  and  Telephone  and  telegraph  facilities  should  be 
telegraph.  a  par{.  Ojr  fae  postal  service.  The  advantages 
of  quick  and  cheap  communication  are  obvious.  These 
services  are  of  high  educational  value.  Private  monopoly 
has  already  prepared  them  for  the  final  absorption  by 
the  Federal  government  and  the  immediate  effects  of  the 
change  would  hardly  be  perceptible.  It  is  probable  that 
extensions  into  remote  territory  would  take  place  more 
rapidly  under  public  initiative  than  under  private.  This 
has  been  true  of  the  postal  service. 


262  THE  WAY  OUT 


Coal  The   coal   industry,   for   various   reasons, 

industry.  should  be  developed  to  the  highest  possible 

degree  of  efficiency.  Coal  once  used  cannot  be  regained. 
It  is  therefore  of  highest  importance  that  waste  should  be 
avoided.  The  deposits  vary  so  much  that  no  two  opera- 
tions are  at  the  same  cost,  and  as  a  certain  amount  must 
be  had,  it  necessitates,  under  production  by  small  units, 
that  the  basic  price  shall  be  made  upon  the  operation 
which  costs  most.  This  permits  the  favorably  circum- 
stanced mines  to  charge  more  than  a  fair  price  in  times  of 
large  demand  and  to  operate  during  dull  periods  when 
the  more  costly  operation  can  no  longer  get  cost  for  its 
production.  This  condition  makes  it  desirable  that  there 
should  be  a  centralized  ownership  and  control  of  coal,  so 
that  productive  costs  could  be  averaged  and  the  price  to 
consumers  fixed  by  the  same  rule. 

Nationalization  Were  the  coal  industry  nationalized,  a  thor- 
ofcoal.  ough  system  of  conservation  could  be  put 

into  effect  that  would  greatly  reduce  the  wastes  and  in- 
crease efficiency.  Taken  in  connection  with  the  national- 
ization of  railroads,  the  policy  of  developing  energy  at 
the  mines,  transmitting  it  by  wire,  could  be  carried  out, 
thus  saving  the  cost  of  hauling.  The  electrifying  of  the 
lines  would  not  only  save  the  movement  of  the  coal  re- 
quired by  the  roads,  but  it  would  distribute  power  over 
wide  areas  to  be  used  for  all  other  purposes.  The  govern- 
ment could  establish  laboratories,  and  employ  such  pro- 
cesses as  would  bring  the  production  of  coal  under  scien- 
tific methods  and  thus  get  out  of  it  all  its  valuable  prop- 
erties. 

American  The  American  people,  blessed  as  perhaps  no 
waste.  others  have  ever  been  with  a  rich  store  of 

natural  wealth,  have  not  shown  themselves  capable  of 


NEXT  STEPS  263 


wisely  administering  the  trust  thus  imposed  upon  them. 
The  reckless  way  in  which  they  have  wasted  the  natural 
resources  of  the  country  reminds  one  of  the  herd  finding 
a  fine  pasture.  They  proceed  without  thought  of  the  fu- 
ture to  trample  under  foot  and  destroy  ten  times  as  much 
as  they  consume,  and  later  starve  for  lack  of  food. 

improvident      Under  the  present  system  of  coal  produc- 
tion,   if    the    haphazard,    happy-go-lucky 
^°dduct  methods  may  be  dignified  by  the  term,  the 

consumption.  Prospect  of  immediate  gain  is  the  control- 
ling factor,  and  all  who  can  get  together  the 
necessary  equipment,  however  inefficient  and  crude, 
launch  into  the  mining  business.  With  no  general  policy, 
little  thought  of  preparation  for  efficient  conservation, 
the  business  proceeds  to  appropriate  what  it  can  to-day, 
wasting  perhaps  far  more  than  it  gains  and  leaving  the 
future  to  take  care  of  itself ! 

When  it  is  considered  that  coal  and  transportation,  of 
all  things  are  most  vital  to  the  existence  of  civilization, 
it  should  require  little  persuasion  to  induce  the  public  to 
make  its  position  safe  in  these  respects. 

Danger  lurks  There  inhere  in  these  two  things  the  latent 
in  mining  and  possibilities  of  social  destruction.  Already 

nsportation.    {n  ^  1()cal  revolutions  fa  Colorado,   West 

Virginia,  and  elsewhere,  the  country  has  been  put  under 
notice  that  danger  lurks  in  these  things.  Suppose  at  some 
critical  period  the  coal  and  transportation  interests, 
either  through  the  employers  or  employees,  decide  to 
coerce  the  general  public,  it  is  entirely  in  the  power  of 
these  two  or  three  million  people  to  bring  the  entire  popu- 
lation to  a  condition  that  is  more  easily  imagined  than 
described.  When  this  fact  is  taken  in  connection  with  the 


264  THE  WAY  OUT 


additional  fact  that  private  ownership  and  operation  of 
these  basic  services  have  much  in  them  to  incite  revolu- 
tionary conflict,  it  becomes  increasingly  plain  that  public 
safety  demands  that  the  change  be  made. 

The  public  The  lessons  of  history  do  not  teach  that  so- 
lackof  cjety  foas  ever  possessed  the  faculty  of  pre- 

an*  vision  to  any  marked  degree,  and  it  is 
scarcely  probable  that  the  immediate  future  will  be  much 
different  from  the  past  in  this  respect.  It  has  always 
blundered  along  from  one  impossible  situation  to  another 
and  made  such  progress  as  necessity  compelled.  It  may 
continue  to  do  so,  paying  the  exorbitant  price  that  inat- 
tention, inefficiency,  and  ignorance  always  pay  for  their 
sins  of  omission  and  commission. 

The  individual  After  all,  the  question  narrows  down  to  the 
the  important  individual.  Whether  considered  socially, 
economically,  or  otherwise,  the  institutions 
existing  at  any  given  time  are  faithful  reflections  of  the 
people  of  that  time.  As  the  latter  rise  to  higher  levels, 
they  carry  the  former  up  with  them,  but  if  they  descend 
to  lower  planes  their  shadows  faithfully  follow  them. 

Human  Manifestly,  the  pressing  need  is  for  human 

development  development.  The  progressive  forces  of  the 
an  '  nation  should  concentrate  their  power  to  de- 
velop both  the  moral  and  intellectual  ability  of  the  indi- 
vidual, striving  at  the  same  time  to  remove  as  far  as  pos- 
sible every  barrier  that  stands  in  the  way.  The  need  is 
for  more  education  and  better  education — not  mere  lit- 
eracy, but  a  development  of  the  power  to  think  and  under- 
stand, and,  of  equal  importance,  the  development  of  the 


NEXT  STEPS  265 


love  of  right  and  truth.  When  these  objects  have  been  ac- 
complished there  yet  remains  a  still  more  difficult  problem 
to  solve. 

The  crucial  What  can  be  done  to  increase  the  capacity  of 
problem.  ^e  individual,  thus  enlarging  the  potential- 

ities of  this  and  succeeding  generations?  It  is  proverbial 
that  one  cannot  make  a  silk  purse  out  of  a  sow's  ear. 
What  can  be  done  to  increase  the  production  of  silk  and 
diminish  that  of  sow  ears?  It  has  been  stated  that  a  mil- 
lion, seven  hundred  thousand  men  drafted  for  service  in 
the  great  war,  when  tested  as  to  their  intellectual  ca- 
pacity, showed  an  average  age  of  thirteen  years!  This 
would  indicate  that  in  this  country  there  are  millions  of 
adults  who  have  minds  that  are  not  above  those  of  normal 
children  from  eight  to  twelve  years  old ! 

The  mass  of  When  one  considers  this  immense  horde  of 
morons.  morons  that  is  an  old  man  of  the  sea  upon 

the  back  of  society,  the  tardiness  of  social  evolution  ceases 
to  excite  surprise.  It  is  unfortunately  true  that  the  lower 
the  mental  capacity  of  the  individuals,  the  greater  their 
fecundity.  Shall  this  flood  of  deficients  continue  to  rise 
until  it  submerges  civilization,  making  impossible  the 
higher  and  better  things  that  might  be  reasonably  antici- 
pated from  a  development  of  the  race?  How  much  the 
desire  of  large  operators  for  cheap  labor  and  the  lax  im- 
migration policy  which  it  caused  are  responsible  for  this 
large  deficient  class  is  indeterminable,  but  fruitful  en- 
quiry for  remedial  legislation  might  be  found  in  this 
quarter.  The  thought  that  the  deficient  class  will  destroy 
civilization  is  disturbing,  but  the  possibility  should  not  be 
accepted  as  established.  On  the  contrary,  this  danger 
should.be  taken  as  a  challenge  to  the  better  endowed  to  do 
their  best  to  remove  the  danger  by  controlling  and  eradi- 


266  THE  WAY  OUT 


eating  the  causes,  which  if  left  alone,  would  probably  pro- 
duce such  deplorable  results.    The  subject 
is  of  sufficient  importance  to  merit  thorough 
capable  investigation  and  study,  after  which  the 

matter  of  methods  could  be  more  intelli- 
gently considered.  Politically,  the  deficient  classes  are 
a  positive  menace,  in  that  they  furnish  the  material  with 
which  evil  propagandists  and  conscienceless  demagogues 
can  work  mightily  and  destructively. 

The  program  outlined,  viewed  by  itself,  may  appear 
imposing,  but  when  it  is  contrasted  with  what  might  be 
done,  its  moderation  becomes  apparent. 

THE  END. 


INDEX 


AMERICAN  Merchant  Marine  discrim- 
inated against,  178. 

Amity  to  displace  enmity,  164. 

Anti-trust  law,  241.  , 

Aristotle,  132.  , 

BANKS,  the  function  of,  219;  legiti- 
mate field  of,  219. 

Bank  credits,  207 ;  conform  to  rep- 
resentative credit  principles,  209; 
changed  into  currency  and  vice- 
versa,  223;  control  of  by  private 
interests  unsafe,  223. 

Banking,  extension  of,  107 ;  banking 
interests  dominate  business,  106; 
controls  railroads,  253. 

Banking  laws  should  be  enacted,  230. 

Banking  and  currency,  field  for  na- 
tionalization, 251. 

Barter,  dependent  on  transportation, 
199,  200;  facilitated  by  credit  ex- 
change, 204. 

Business,  defined,  100;  opposition  to 
growth  of,  101;  beginning  in  small 
units,  102;  dominated  by  banking 
interests,  106;  acts  constructively, 
109;  supported  by  public,  109, 
118;  growth  and  extension  of, 
250;  international  business  could 
be  done  under  a  single  standard, 
259. 

Bonds,  a  method  of  contributing 
capital,  60;  held  against  bank 
notes  to  be  cancelled,  228;  payment 
of  bonds  made  by  sale  of  gold  and 
liquidation  of  debts  due  against 
Federal  Reserve  notes,  228. 

Borrower,  takes  primary  risk,  82. 

CAPITAL,  defined,  59;  hire  of,  59; 
need  for,  60,  63;  forms  of  contri- 
bution to,  61;  moral  obligation  to 
permit  beneficial  use  of,  63;  bene- 
fits resulting  from  use  of,  66;  pay 
for  capital,  an  exaction,  67 ;  re- 
turn on  capital  stimulates  few,  de- 
presses many,  79 ;  capital  and  la- 
bor, 90,  126;  not  an  entity,  116; 
pay  of  capital  the  controlling  con- 
sideration, 117;  payment  for  use 
of,  125;  capital  and  labor  monop- 
olies, 144;  a  cause  of  contraction 
of  the  basis  of  representative  credit 
exchange,  218. 

Capitalism,  defined,  21;  origin  of,  60; 
reason  for,  61 ;  capitalism  and  co- 
operation contrasted,  61;  a  meth- 
od only,  62;  not  necessary,  63; 
lacking  moral  foundation,  65,  81; 
rests  upon  profit,  72;  entitled  to 
live  until  discovery  of  better  in- 
strument, 81;  inethical,  89;  nec- 
essarily productive  of  evil  effects, 
90;  ever-increasing  exaction,  92; 
spreading  the  base  of,  94;  ultimate 


effect  of,  96;  cause  of  class  divi- 
sion, 98;  greatest  evil  of,  98;  press 
controlled  by,  105;  special  privi- 
lege, the  basic  principle  of,  111; 
greed  the  cause  of,  118;  makes 
necessary  a  subject  class,  134;  its 
mania  for  gain,  143;  capitalism 
and  states'  rights,  248. 

Capitalist,   defined,   21. 

Central  Bank,  in  lieu  of  Federal  Re- 
serve Board,  222;  reserves,  230; 
creation  of,  261. 

Central  Banking  system,  limiting  the 
sphere  of,  224;  regulation  of  in- 
terest rates  in,  224 ;  "Credit  notes" 
should  be  issued  by,  229;  should 
require  that  loan  fund  be  neither 
increased  nor  decreased,  230.. 

Carnegie,  76. 

Chambers  of  Commerce,,   103,   150. 

City  manager,  247. 

Civilization,  thinkers  advance  agents 
of,  101. 

Class  efficiency,  dependent  upon  rec- 
ognition of  interdependence,  145. 

Class  interests,  growth  of,  144;  ten- 
dency toward  Democracy,  145. 

Coal  industry,  need  for  development 
of,  262;  nationalization  of,  262; 
improvident  production  and  con- 
sumption of,  263;  private  owner- 
ship of  coal  industry  incites  revo- 
lution, 263. 

Collateral,  the  use  of,  239. 

Collectivism,  7. 

Combination,  against  the  public, 
125;  not  wrong  in  itself,  242;  in 
spite  of  law,  243 ;  but  an  aggrega- 
tion of  individuals,  243;  law 
against,  furnishes  unexpected  re- 
sults, 243. 

Common  labor,  the  burden  bearer, 
131. 

Communication,  evolution  of,    138. 

Communism,  defined,  7 ;  growth  of, 
8;  growth  in  private  business, 
state  service,  9;  eleemosynary  in- 
stitutions examples  of,  10;  love  the 
basis  of,  11;  necessary  for  devel- 
opment of  emotional  nature,  23; 
wards  of,  47;  makes  classes,  88; 
promoted  by  captains  of  industry, 
171;  public  education  and  public 
health  State  Communism,  249. 

Communistic  contribution  not  always 
a  loss,  86. 

Communistic  administration,   182. 

Compensation,  effect  of  law  of,  22; 
fairly  computed,  32;  for  minerals 
and  oils,  36;  of  workers  only  a 
part  of  their  production,  122. 

Competition,  rise  of,  15;  reasons  for 
permitting,  15;  destructive,  15;  use 


268 


INDEX 


of,  16;  in  cooperation,  18;  destruc- 
tive competition  now  impossible, 
19. 

Congress,  its  power  to  issue  cur- 
rency, 256. 

Conservation,  64. 

Conservative  progression,  251. 

Contracts,  of  force,  114;  under  du- 
ress, 114;  intention  the  basis  of, 
115;  mutual  consideration  the  con- 
trolling factor  of,  115;  unjust  con- 
tracts injurious  to  both  parties, 
116. 

Contractors,  controlled  by  mutual 
consideration,  115. 

Cooperation,  inclusive,  8;  birth  of, 
13;  reason  for,  14;  units  of,  15; 
economies  of,  17;  duty  of,  18; 
competition  in,  18;  class,  19; 
abuses  of  cooperation  temporary, 
19;  necessary  for  efficiency,  23; 
law  of,  90;  private,  96;  mankind 
averse  to,  100;  the  law  of  associa- 
tion, 100;  necessity  of  labor  coop- 
eration, 113;  cooperation  of  work- 
ers, agency  for  increased  efficiency, 
123;  developing  among  farmers, 
132;  right  of  individual  initiative 
not  antagonistic  to  cooperation, 
155;  for  efficiency,  156;  coopera- 
tion and  individuality  not  antago- 
nistic, 157;  gives  opportunity  to 
demonstrate  prowess,  158;  greater 
cooperation  raises  moral  standard, 
160;  demands  wide  experience, 
165;  past  attitude  toward,  241; 
in  rural  districts,  245. 

Cooperative  production,  10;  coopera- 
tive distribution,  10;  cooperative 
manufacture,  133;  individual  ini- 
tiative demanded  by  cooperative 
organization,  123. 

Credit,  power  to  inflate  and  deflate, 
the  power  to  rob,  213;  "kiting"  of, 
219;  necessity  for  maintenance  of 
present  volume  of,  225;  standard 
of  value  changed  by  arbitrary  in- 
crease or  decrease  of,  235. 

Credit  exchange,  dependent  upon 
faith,  201;  facilitates  barter,  204; 
convertible  on  demand  into  prod- 
ucts, 205;  essential  features  of, 
206;  demands  for  stored  value, 
209;  prices  should  not  be  affected 
by,  209;  should  not  be  affected  by 
gold  shipment,  213;  not  capital, 
217;  differentiated  from  acquisi- 
tion of  capital,  218;  decreased  by 
acquisition  of  capital,  218. 
Credit  currency,  purely  representa- 
tive, 216. 

Credit  instruments,  two  classes  of, 
207. 


"Credit  notes,"  227;  should  be  issued 
by  Central  Bank,  229;  will  be  au- 
tomatically cancelled,  233;  re- 
serves against,  234. 
Currency,  government  currency,  207 ; 
shortage  of  currency  evidence  of  a 
defective  system,  217;  "flexible" 
currency,  bad  currency,  218; 
should  be  issued  only  against  the 
surrender  of  corresponding 
amounts  of  bank  credit,  222; 
change  of  bank  credit  into  currency 
and  vice-versa,  223;  present  cur- 
rency mostly  predicated  upon  debt, 
225;  liquidation  of  currency,  226; 
two  kinds  suggested,  227;  redemp- 
tion of,  232;  against  deposit  of 
bonds,  etc.,  unsound,  239;  not  nec- 
essarily affected  by  unbalanced 
budgets,  239;  government  issues  of 
currency  a  trust  function,  240; 
systems  of  America  and  Europe 
compared,  240;  the  power  of  Con- 
gress to  issue,  256. 

Currency  and  bank  credit  system,  a 
sound  system,  208;  arbitrary  sys- 
tem not  stable,  211;  a  better  one 
possible,  222;  unsafe  under  pri- 
vate initiative,  223;  difficulty  of 
displacing  previous  system,  224; 
adjustment  of  a  new  sysytem  to 
present  standard  of  value,  225; 
will  not  affect  prices,  231;  un- 
soundness  of  indicated  by  booms 
and  depressions,  235;  responsible 
for  post-war  troubles,  236;  should 
be  kept  distinct  from  public  debt, 
257;  most  hopeful  method  for  re- 
habilitation of  European  currency 
systems,  257 ;  proposed  interna- 
tional currency  system,  258;  inter- 
national, 259. 

Currency  and  bank  credit,  defined, 
201;  things  that  cannot  be  used  as 
a  basis  of,  236;  effect  of  its  issue 
upon  prices,  237;  a  trust  obliga- 
tion, 237;  sound,  238;  power  of 
government  to  issue,  256. 

DEBT,  public  or  private,  not  a  proper 
basis  for  a  currency  or  bank  credit 
issue,  237. 

Debtor  and  creditor  robbed  by  fluctu- 
ating standard,  203. 

Decadence,  signs  of,  51. 

Democracy,  underlying  principles  of, 
28;  antagonism  between  special 
privilege  and  democracy,  111;  in- 
dustrial, 123;  a  growth,  124;  pre- 
paration for  diffusion  of,  123; 
class  interests  tend  toward,  145; 
learning  by  divisions,  145;  con- 
trasted with  autocracy,  162;  is 


INDEX 


269 


democracy  possible?  197;  gives 
freedom  of  action,  197. 

Democratic  equality  between  em- 
ployer and  employee  promoted  by 
intelligence,  122. 

Dependent  classes,  duty  to,  56. 

Development  should  be  adapted  to 
needs  of  the  locality,  246. 

Distribution,  communistic  and  social- 
istic contrasted,  10;  justice  the 
basis  of,  11;  economy  superinduced 
by  just  distribution,  71;  the  ideal, 
86;  more  just,  164. 

Dollar,  200;  the  present  established 
standard  of  value,  225. 

ECONOMICS,  founded  upon  ethics,  21. 

Economic  development,  three  stages 
of,  146. 

Economic  evolution,  138. 

Economic  law,  the  true  price  regu- 
lator, 231. 

Economic  organization  now  auto- 
cratic, 121. 

Economic  power  greater  than  state 
power,  249. 

Education,  by  the  State,  9;  the  rem- 
edy, 120;  most  widespread  to-day, 
121;  hope  in,  151;  in  rural  dis- 
tricts, 245;  need  for  better,  264. 

Employer,  and  employee  problem, 
116,  123;  and  employee  affected 
alike,  94;  not  responsible  for  sys- 
tem, 118;  effort  to  prevent  organi- 
zation of  workers  fruitless,  118; 
opposition  to  rise  of  employee,  122. 

Equality  of  opportunity,  the  safe 
foundation,  163. 

Evolution,  54,  138,  142;  forced  for- 
ward by  invention,  185;  cannot  be 
stopped  by  reaction,  185. 

Exchange,  advantage  in,  67. 

Exchange  system,  faulty  operation  a 
cause  of  rise  and  fall  of  business 
activity,  221. 

Experience,  the  teacher,  151. 

Exploiters  few,  exploited  many,  98. 

Exploitation,  not  cured  by  enlarge- 
ment of  exploiting  class,  95. 

FARMERS,  and  common  labor,  132; 
least  social-minded,  132;  coopera- 
tive psychology  developing  among, 
133. 

Federal  Reserve  Banks,  would  fur- 
nish framework  for  better  system 
of  currency  and  bank  credit,  222; 
functioning  under  a  Central  Bank, 
261. 

Federal  Reserve  Law,  opportunity  for 
changing  the  price  level  increased 
by,  226;  credit  system  made  a  pri- 
vate monopoly  by,  227;  has  power 
to  create  arbitrary  credit  based  on 
private  debt,  227. 


Federal  Reserve  System,  216;  rapid 
inflation  under,  226. 

Fiat  credit  instruments  affect  prices, 
210. 

Financial  savings  under  government 
ownership  of  railroads,  251. 

Fluctuation  in  business  activity 
caused  by  faulty  operation  of  ex- 
change system,  221. 

Force,  mind  and  physical  contrasted, 
46. 

Freedom  of  individual  action,  157. 

Freedom  of  initiative,  163. 

GOLD,  not  a  proper  element  of  credit 
exchange,  200;  cannot  be  a  stand- 
ard of  value,  212;  shipment  should 
not  affect  credit  exchange,  213;  as 
a  basis  of  currency,  a  source  of 
evil,  213;  gold  reserves  not  useful, 
220;  gold  production  excessive,  an 
economic  waste,  220;  danger  of  ac- 
cumulation, 220;  not  needed  in  a 
representative  currency  system, 
221 ;  gold  and  silver  coinage  should 
be  discontinued,  228;  proceeds  of 
sale  of  should  be  applied  to  pay- 
ment of  bonds,  228. 

Gold  basis,  immoral,  214;  objections 
to,  216. 

Gold  certificates,  warehouse  receipts, 
225;  should  be  redeemed  in  "Treas- 
ury notes"  or  coin,  228. 

Gold  standard  system  should  be  dis- 
carded, 260;  gold  standard  system 
and  Great  Britain,  261. 

Government,  by  the  few,  149;  result 
of  government  regulation,  149;  cer- 
tification of  weight  and  fineness, 
199 ;  ownership  of  Central  Banking 
system,  223,  227;  currency  a  debt, 
238;  issues  of  currency  a  trust 
function,  240;  increase  of  function, 
250;  ownership  of  railroads  would 
put  rates  on  a  mileage  basis,  254; 
cannot  make  something  out  of 
nothing,  257. 

Great  Britain  and  the  gold  standard 
system,  261. 

Guild  principle,  102. 

HEALTH  work  and  schools,  249. 

Hepburn  rate  bill,  248. 

INDIVIDUAL,,  the  final  judge,  153;  im- 
portance of,  161;  problem  to  in- 
crease capacity  of,  265. 

Individual  initiative,  important, 
121;  liberty,  154;  freedom  of,  153. 

Individual  worth,  increasing  appre- 
ciation of,  159,  162. 

Individual  responsibility  increased, 
161. 

Individualism,  defined,  8;  limited, 
12;  valuable,  12;  necessary  for 


270 


INDEX 


existence  of  individual  initiative, 
23. 

Industrial  change,  becoming  a  world 
problem,  131. 

Industrial  democracy   slow,    123. 

Industrial  organization,  141. 

Inflation  and  deflation,  America  suf- 
fering from,  214;  prevention  of, 
222;  gradual  increase  of,  226;  ra- 
pid inflation  under  Federal  Re- 
serve system,  226;  retention  of  in- 
flation for  stabilization,  232;  ex- 
tent of,  233;  prevented  by  setting 
up  reserves,  233;  probable  bank  in- 
flation, 234. 

Initiative,  freedom  of,  153. 

Injustice,  provocative  of  discord, 
126;  between  employer  and  em- 
ployee, 115. 

Institutions,  eleemosynary,  10;  born, 
not  made,  244. 

Insurance,  charge  justified,  68;  abuse 
of  insurance  fund,  71;  insurance 
fund  under  capitalism  represented 
by  net  earnings,  91. 

Interest,  61,  66,  69;  regulated  in  Cen- 
tral Banking  system,  223,  230. 

International  currency  system  pro- 
posed, 258;  international  business 
could  be  done  under  a  single  stand- 
ard, 259;  international  currency 
and  bank  credit,  259;  international 
prices,  260. 

Interstate  Commerce  Commission, 
248,  249. 

Invention  of  machinery  cause  of  im- 
provement, 62;  forces  evolution 
forward,  214. 

Inventive  faculty  dwarfed,  121; 
cause  of  social  improvement,  140. 

Israelites,  74. 

JUSTICE,  the  safe  way,  127. 

LABOR,  defined,  21;  law  of,  25;  re- 
sults of  property,  27;  labor,  the 
law  of  being,  45,  138;  cooperative, 
53;  want  produced  by  non-produc- 
tive labor,  53;  effective,  54;  better 
adjustment  of,  54;  not  a  commod- 
ity, 116;  erroneous  views  of  labor 
organization,  119;  labor  coopera- 
tion not  to  be  prevented,  118;  duty 
to  organize,  119;  capital  and, 
126;  increased  demands  of,  131; 
farmers  and  common  labor,  132; 
waste  by  duplication  of,  137. 

Labor  union,  129. 

Laborers,  necessity  for  work,  47. 

LaFollette,  105. 

Laissez-faire,  involves  force  and  se- 
lection, 170. 

Land,  defined,  21 ;  common  owner- 
ship of,  25;  no  conflict  of  rights  in 
common  ownership  of,  27 ;  division 


of,  28;  vested  rights  in,  29;  abuse 
of  the  common  right  in,  30;  law  of 
eminent  domain,  33 ;  speculation  in, 
33;  damages  under  eminent  do- 
main, 34;  development  retarded  by 
owners,  34;  public's  right  inalien- 
able, 35;  individual's  right  to  land 
in  use,  37;  effects  of  private  owner- 
ship of,  38;  effect  of  land  value, 
39;  effects  of  common  right  in,  41; 
feudal  tenure,  42. 

Law,  of  collective  effort,  56;  of  being, 
56;  futile  in  arresting  economic 
progress,  147;  against  evolution 
not  effective,  242. 

Laws,  for  social  expression,  244; 
should  be  adapted  to  present  sit- 
uation, 244. 

Leadership  essential,  145. 

Liberty,  loss  of,  self-inflicted,  153; 
defined,  154;  term  misunderstood, 
155;  consists  in  right  to  obey 
moral  law,  155. 

Liquidation  of  currency,  226. 

MALUM  in  se,  241;   prohibitum,  241. 

Majority  action,  not  valid  against 
moral  law,  125. 

Man,  gregarious,  13;  his  acts  a  series 
of  approximations,  22;  land  his 
heritage,  25;  born  free  and  equal, 
26;  creation  of,  28;  greed  of,  40; 
made  up  of  mental  and  physical 
powers,  46;  imperative  duty  of, 
47;  complexity  of,  48;  differentiat- 
ed from  the  beast,  52;  duty  to 
eliminate  ineffective  labor,  53; 
worship  of  the  material,  73;  learns 
from  mistakes,  136;  a  social  being, 
156;  desire  to  excel,  159. 

Manufacture,  63;  primitive  methods 
of,  138;  manufacture  and  com- 
merce concentrated  by  transporta- 
tion policy  of  the  railroads,  254. 

Marketing  system  of  the  country 
would  be  affected  by  equal  oppor- 
tunity in  transportation,  254. 

Merchant  Marine,  177;  policy,  be- 
trayal of  a  public  trust,  188. 

Mexico,  178. 

Monopoly,  16;  march  toward,  141, 
144;  private,  151;  private  monop- 
oly serves  a  purpose,  151 ;  private 
monopoly  only  a  stage  in  human 
progress,  151;  of  force  or  selec- 
tion, 168;  the  ideal,  169;  two 
classes  of,  169;  germ  of,  in  all 
business,  172;  the  public's  choice 
of  form,  172;  public  and  private 
contrasted,  172;  public  monopoly's 
broader  base  for  capitalization, 
173;  public  superior  to  private 
monopoly,  173;  principles  of  pub- 
lic and  private  monopoly  different, 


INDEX 


271 


173;  private  monopoly  must  first 
serve  itself,  174;  private  monopoly 
must  exploit,  174;  contest  between 
public  and  private,  175;  private 
lacks  moral  foundation,  175;  pri- 
vate monopoly  by  nature  an  ex- 
ploiter, 176;  gravitates  toward  cor- 
ruption, 176;  private  monopoly 
seeking  to  conquer,  177;  private 
monopoly  has  power  of  taxation 
without  representation,  177;  in- 
herent weaknesses  of  private  man- 
opoly,  178;  economic  advantages 
of  public  monopoly,  179;  public 
monopoly  and  private  accumula- 
tion, 180;  public  monopoly  the 
highest  economic  development, 
181;  public  monopoly  opposed  for 
fear  of  its  success,  184. 

Morons,  mass  of,  265. 

NAPOLEON,  individual  prowess  recog- 
nized by,  162. 

Nationalization,  fields  for,  251;  of 
railroads  reactionary,  255. 

Net  earnings,  91. 

North  Dakota,  178. 

Notes,  61. 

ORGANIZATION,  a  necessity,  9;  social- 
ism, communism,  and  individual- 
ism essential  parts  of  human  or- 
ganization, 12;  society  an,  13; 
purpose  of  workers',  118;  erron- 
eous views  of,  119;  prompted  by 
self  interest,  140;  requisites  of, 
140,  142;  effects  of  upon  the  indi- 
vidual, 152. 

Over-specialization,   164. 

PAPER  currency  to  be  issued  only 
against  the  surrender  of  corre- 
sponding amounts  of  bank  credit, 
222. 

Parcel  post,  opposed,  189;  the  zone 
system,  190. 

Partnership,  first  method  for  provid- 
ing increased  capital,  60;  general, 
61;  special,  61. 

Patent,  possession  gives  monopoly 
power  to  impose  its  will  upon 
those  dependent  upon  it  for  serv- 
ice, 168. 

Pauperism,  53. 

Payment  of  bonds  made  by  liquida- 
tion of  gold  and  debts  due  against 
Federal  Reserve  notes,  228. 

Plebeian  class,  132. 

Post-office  department,  192;  best  ex- 
ample of  application  of  service 
principle,  193. 

Postal  system,  Thomas  Jefferson's 
distrust  of,  193;  its  history  its 
best  witness,  194;  not  a  cause  of 
corruption,  195. 


Poverty,  its  cause,  137. 

Press,  power  of  business  over,  103: 
influence  of  advertisers  over,  104; 
editorial  policy  influenced,  104; 
railroad  influence  over,  105. 

Prices,  price  changes,  231 ;  regulated 
by  economic  law,  231;  internation- 
al, 260. 

Principles,  suggested  application  of, 
241;  sound  principles  should  not 
be  legislated  against,  242. 

Private  initiative,  unsafe  to  leave 
currency  and  control  of  bank  cred- 
its under,  223. 

Private  ownership  of  coal  and  trans- 
portation invites  revolution,  263. 

Profit,  divests  worker  of  title,  88; 
a  tribute,  88;  profit  first,  service 
second,  93. 

Profit  sharing  not  a  remedy,  96. 

Progress,  dependent  upon,  137;  of 
civilization  by  empirical  effort, 
184. 

Public,  against  interruption  of  serv- 
ice, 110;  change  of  opinion,  148; 
public  service  includes  all  social 
acts,  168;  administration  attacked, 
182;  growth  of  sentiment  for  pub- 
lic ownership,  186;  lack  of  initia- 
tive of,  197;  ownership  and  opera- 
tion of  public  service  institutions, 
246;  public  ownership  and  private 
interests  should  make  no  entan- 
gling alliances,  254. 

RAILWAY  system,  example  of  monop- 
olistic ingratitude,  177. 

Railroads,  change  of  view  in  regard 
to  states'  rights,  248;  field  for  na- 
tionalization, 251 ;  one  system  of, 
251;  tale  of  woe,  253;  manufac- 
ture and  commerce  concentrated  by 
transportation  policy  of,  254;  na- 
tionalization of,  reactionary,  255. 

Rate,  of  hire,  60;  effect  of  high  in- 
terest rate,  66;  of  interest,  measure 
of  progress,  79;  rates  would  be  put 
on  mileage  basis  in  government 
ownership  of  railways,  254. 

Redemption  of  currency,  232. 

Regulation,  impossible,  97,  146,  148; 
public  relies  upon,  148;  effect  of, 
170;  of  interest  rates  in  Central 
Banking  system,  224,  230;  of 
credit  operations  in  proposed  Cen- 
tral Banking  system  dependent 
upon  principles  rather  than  human 
discretion,  231. 

Representative  credit  exchange,  205; 
system  subject  to  dangerous  man- 
ipulation, 214. 

Representative  currency  system  needs 
no  gold,  221. 


272 


INDEX 


Reserves,  to  prevent  inflation,  233; 
against  "Credit  notes,"  234. 

Rural  districts,  best  field  for  coopera- 
tion in,  245. 

Russia,  178. 

SAVING,  reasons  for,  77;  promoted  by, 
78;  an  instinct,  80;  increased  by 
intelligence,  80. 

Schoolhouse  should  be  center  of  rural 
cooperative  activities,  245. 

School  system  should  be  democratic, 
245. 

Schools  and  health  work,  249. 

Service  principle  in  cities,  246. 

Sherman  anti-trust  act,  241. 

Shylock,  79. 

Slavery,  causes  of,  154;  self-inflicted, 
153. 

Socialism,  defined,  8;  promoted  by 
captains  of  industry,  171;  public 
or  private?  191;  public  and  private 
contrasted,  194;  private  socialism 
a  direct  cause  of  socialism,  195; 
political  power  not  developed  by 
public  socialism,  196. 

Socialistic  cooperation,  10;  rule  of 
distribution,  117;  activities,  191; 
socialistic  enterprise  has  only  lim- 
ited opportunity  in  separate  states, 
247. 

Social  service  under  private  initia- 
tive a  privilege,  169. 

Social  development,  local,  state,  na- 
tional, and  international,  245. 

Society,  three  classes  of,  86;  stand- 
ard raised,  121;  usually  against 
progress,  170;  lack  of  prevision  of, 
264. 

Special  privilege,  a  grant  from  the 
sovereign,  167;  free  government 
destroyed  by  triumph  of,  169; 
short  sighted,  171;  desire  to  per- 
petuate its  power  supreme,  178; 
reverted  to  after  removal  of  pres- 
sure, 181;  states'  effort  to  limit 
exploitation  may  be  defeated  by, 
247. 

Stabilization,  of  values  the  end  de- 
sired, 229;  the  reason  for  retaining 
inflation,  232. 

Standard  of  value,  in  system  of  cred- 
it exchange,  202;  single  standard 
necessary,  203;  must  be  invariable, 
203;  diverse  standards  immoral, 
203;  must  be  intangible  and  in- 
variable, 203;  not  flexible,  205; 
changed  by  arbitrary  alteration  in 
volume  of  currency,  208;  the  pro- 
per, 211;  cannot  be  a  material  sub- 
stance, 215;  present,  224;  debtor 
or  creditor  robbed  by  change  of, 


225;  changed  by  arbitrary  increase 
or  decrease  of  credit,  235. 

States'  rights,  and  capitalism,  248; 
railroads'  change  of  view  in  regard 
to,  248. 

State  opportunity  restricted,   186. 

Stock,  interest,  61. 

TARIFF,  141. 

Taxation,  proper  use  of,  43. 

Telegraph  and  Telephone  system, 
fields  for  nationalization,  251; 
should  be  part  of  postal  service, 
261. 

Transportation,  capitalistic  control 
of,  96;  primitive,  138;  banking 
control  no  longer  needed  in,  253; 
effects  of  equal  opportunity  in, 
254;  revolution  incited  by  private 
ownership  of,  263. 

Trusts,  146;  would  be  regulated  by  a 
system  of  equal  opportunity  in 
transportation,  254. 

Trustee,  obligation  to  ward,  70;  Car- 
negie on,  76;  government  a  trustee 
for  the -public,  239. 

Trust  relation,  70;    betrayal  of,   188. 

UNITED  States,  dumping  ground  for 
gold,  220. 

United  States'  government  should 
own  Central  Banking  system,  223. 

Utility,  demands  of,  48;  works  of, 
49;  disregard  of  the  demands  of, 
50. 

VALUE,  circulatory  and  commodity 
values,  201;  an  abstract  idea,  202; 
is  variable,  204 ;  of  unit  changed 
by  arbitrary  issues,  210. 

WAGES,  62,  117;  effect  of  cooperation 
on,  122. 

Waste,  262. 

Wards,  of  Communism,  47. 

Wealth,  by  accretion,  108;  increase 
not  necessarily  due  to  profit  sys- 
tem, 179. 

Whittington,  Dick,  72. 

Work,  measure  of,  47;  exhaustive 
work  not  economical,  128. 

Worker,  defined,  21;  common  respon- 
sibilities of,  56;  working  destruc- 
tively, 109;  cooperation  of,  113, 
116;  right  to  organize,  118;  coop- 
eration of  workers  makes  for  effi- 
ciency, 123;  gives  trouble  during 
prosperity,  126;  raised  standard  of 
living,  129;  driven  to  organize, 
146;  better  treatment  of  and 
greater  opportunities,  158;  should 
have  freedom  of  choice  of  task, 
165. 

World,  need  of  mental  and  physical 
energy  in,  46. 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN     INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  5O  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


DEC    J 

8    1933 
NOV  ?    1934 


"PR  SO  1S39 

7Nov'55GB 

C1CT241955UU 


LD21-50m-8,-32 


532131 


7 


I  6~ 

UNIVERSITY  OF  CALIFORNIA  LIBRARY 


